Correlation Between DG Innovate and FuelCell Energy
Can any of the company-specific risk be diversified away by investing in both DG Innovate and FuelCell Energy 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 DG Innovate and FuelCell Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DG Innovate PLC and FuelCell Energy, you can compare the effects of market volatilities on DG Innovate and FuelCell Energy 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 DG Innovate with a short position of FuelCell Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of DG Innovate and FuelCell Energy.
Diversification Opportunities for DG Innovate and FuelCell Energy
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between DGI and FuelCell is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding DG Innovate PLC and FuelCell Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FuelCell Energy and DG Innovate 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 DG Innovate PLC are associated (or correlated) with FuelCell Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FuelCell Energy has no effect on the direction of DG Innovate i.e., DG Innovate and FuelCell Energy go up and down completely randomly.
Pair Corralation between DG Innovate and FuelCell Energy
Assuming the 90 days trading horizon DG Innovate is expected to generate 382.04 times less return on investment than FuelCell Energy. But when comparing it to its historical volatility, DG Innovate PLC is 25.37 times less risky than FuelCell Energy. It trades about 0.01 of its potential returns per unit of risk. FuelCell Energy is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1,274 in FuelCell Energy on August 29, 2024 and sell it today you would lose (283.00) from holding FuelCell Energy or give up 22.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
DG Innovate PLC vs. FuelCell Energy
Performance |
| Timeline |
| DG Innovate PLC |
| FuelCell Energy |
DG Innovate and FuelCell Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DG Innovate and FuelCell Energy
The main advantage of trading using opposite DG Innovate and FuelCell Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DG Innovate position performs unexpectedly, FuelCell Energy 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 FuelCell Energy will offset losses from the drop in FuelCell Energy's long position.| DG Innovate vs. Foresight Environmental Infrastructure | DG Innovate vs. Iron Mountain | DG Innovate vs. Seche Environnement SA | DG Innovate vs. Spirent Communications plc |
| FuelCell Energy vs. InterContinental Hotels Group | FuelCell Energy vs. Alfa Financial Software | FuelCell Energy vs. PPHE Hotel Group | FuelCell Energy vs. Iron Mountain |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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