Correlation Between Plug Power and FuelCell Energy
Can any of the company-specific risk be diversified away by investing in both Plug Power 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 Plug Power and FuelCell Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Plug Power and FuelCell Energy, you can compare the effects of market volatilities on Plug Power 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 Plug Power with a short position of FuelCell Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Plug Power and FuelCell Energy.
Diversification Opportunities for Plug Power and FuelCell Energy
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Plug and FuelCell is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Plug Power and FuelCell Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FuelCell Energy and Plug Power 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 Plug Power 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 Plug Power i.e., Plug Power and FuelCell Energy go up and down completely randomly.
Pair Corralation between Plug Power and FuelCell Energy
Given the investment horizon of 90 days Plug Power is expected to generate 1.94 times less return on investment than FuelCell Energy. But when comparing it to its historical volatility, Plug Power is 1.55 times less risky than FuelCell Energy. It trades about 0.03 of its potential returns per unit of risk. FuelCell Energy is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,101 in FuelCell Energy on August 27, 2024 and sell it today you would lose (57.00) from holding FuelCell Energy or give up 5.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Plug Power vs. FuelCell Energy
Performance |
| Timeline |
| Plug Power |
| FuelCell Energy |
Plug Power and FuelCell Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Plug Power and FuelCell Energy
The main advantage of trading using opposite Plug Power and FuelCell Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Plug Power 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.| Plug Power vs. Bloom Energy Corp | Plug Power vs. Microvast Holdings | Plug Power vs. Solid Power | Plug Power vs. CBAK Energy Technology |
| FuelCell Energy vs. Bloom Energy Corp | FuelCell Energy vs. Microvast Holdings | FuelCell Energy vs. Solid Power | FuelCell Energy vs. Enovix Corp |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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