Correlation Between Fuel Tech and Energy
Can any of the company-specific risk be diversified away by investing in both Fuel Tech and 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 Fuel Tech and Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fuel Tech and Energy and Water, you can compare the effects of market volatilities on Fuel Tech and 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 Fuel Tech with a short position of Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fuel Tech and Energy.
Diversification Opportunities for Fuel Tech and Energy
Very good diversification
The 3 months correlation between Fuel and Energy is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Fuel Tech and Energy and Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy and Water and Fuel Tech 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 Fuel Tech are associated (or correlated) with Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy and Water has no effect on the direction of Fuel Tech i.e., Fuel Tech and Energy go up and down completely randomly.
Pair Corralation between Fuel Tech and Energy
Given the investment horizon of 90 days Fuel Tech is expected to generate 0.21 times more return on investment than Energy. However, Fuel Tech is 4.87 times less risky than Energy. It trades about 0.07 of its potential returns per unit of risk. Energy and Water is currently generating about -0.14 per unit of risk. If you would invest 104.00 in Fuel Tech on August 28, 2024 and sell it today you would earn a total of 4.00 from holding Fuel Tech or generate 3.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fuel Tech vs. Energy and Water
Performance |
| Timeline |
| Fuel Tech |
| Energy and Water |
Fuel Tech and Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fuel Tech and Energy
The main advantage of trading using opposite Fuel Tech and Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fuel Tech position performs unexpectedly, 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 Energy will offset losses from the drop in Energy's long position.| Fuel Tech vs. Genpact Limited | Fuel Tech vs. Broadridge Financial Solutions | Fuel Tech vs. First Advantage Corp | Fuel Tech vs. Franklin Covey |
| Energy vs. TOMI Environmental Solutions | Energy vs. Zurn Elkay Water | Energy vs. Federal Signal | Energy vs. Energy Recovery |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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