Correlation Between First and FuelCell Energy
Can any of the company-specific risk be diversified away by investing in both First 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 First and FuelCell Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Class Metals and FuelCell Energy, you can compare the effects of market volatilities on First 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 First with a short position of FuelCell Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of First and FuelCell Energy.
Diversification Opportunities for First and FuelCell Energy
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between First and FuelCell is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding First Class Metals and FuelCell Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FuelCell Energy and First 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 First Class Metals 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 First i.e., First and FuelCell Energy go up and down completely randomly.
Pair Corralation between First and FuelCell Energy
Assuming the 90 days trading horizon First Class Metals is expected to under-perform the FuelCell Energy. But the stock apears to be less risky and, when comparing its historical volatility, First Class Metals is 2.23 times less risky than FuelCell Energy. The stock trades about -0.27 of its potential returns per unit of risk. The FuelCell Energy is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,120 in FuelCell Energy on October 10, 2024 and sell it today you would earn a total of 61.00 from holding FuelCell Energy or generate 5.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
First Class Metals vs. FuelCell Energy
Performance |
| Timeline |
| First Class Metals |
| FuelCell Energy |
First and FuelCell Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First and FuelCell Energy
The main advantage of trading using opposite First and FuelCell Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First 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.The idea behind First Class Metals and FuelCell Energy 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.| FuelCell Energy vs. Ubisoft Entertainment | FuelCell Energy vs. Liberty Media Corp | FuelCell Energy vs. Flutter Entertainment PLC | FuelCell Energy vs. Dalata Hotel Group |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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