Correlation Between Algorand and Fuel Tech
Can any of the company-specific risk be diversified away by investing in both Algorand and Fuel Tech at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Algorand and Fuel Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Algorand and Fuel Tech, you can compare the effects of market volatilities on Algorand and Fuel Tech and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Algorand with a short position of Fuel Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algorand and Fuel Tech.
Diversification Opportunities for Algorand and Fuel Tech
Average diversification
The 3 months correlation between Algorand and Fuel is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Algorand and Fuel Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fuel Tech and Algorand is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Algorand are associated (or correlated) with Fuel Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fuel Tech has no effect on the direction of Algorand i.e., Algorand and Fuel Tech go up and down completely randomly.
Pair Corralation between Algorand and Fuel Tech
Assuming the 90 days trading horizon Algorand is expected to generate 2.98 times more return on investment than Fuel Tech. However, Algorand is 2.98 times more volatile than Fuel Tech. It trades about 0.06 of its potential returns per unit of risk. Fuel Tech is currently generating about -0.02 per unit of risk. If you would invest 24.00 in Algorand on October 20, 2024 and sell it today you would earn a total of 23.00 from holding Algorand or generate 95.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 60.2% |
| Values | Daily Returns |
Algorand vs. Fuel Tech
Performance |
| Timeline |
| Algorand |
| Fuel Tech |
Algorand and Fuel Tech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algorand and Fuel Tech
The main advantage of trading using opposite Algorand and Fuel Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algorand position performs unexpectedly, Fuel Tech can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Fuel Tech will offset losses from the drop in Fuel Tech's long position.The idea behind Algorand and Fuel Tech pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Fuel Tech vs. Federal Signal | Fuel Tech vs. CECO Environmental Corp | Fuel Tech vs. Zurn Elkay Water | Fuel Tech vs. Greenlane Renewables |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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