Correlation Between Stellar and FuelCell Energy
Can any of the company-specific risk be diversified away by investing in both Stellar 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 Stellar and FuelCell Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stellar and FuelCell Energy, you can compare the effects of market volatilities on Stellar 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 Stellar with a short position of FuelCell Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stellar and FuelCell Energy.
Diversification Opportunities for Stellar and FuelCell Energy
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Stellar and FuelCell is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Stellar and FuelCell Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FuelCell Energy and Stellar 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 Stellar 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 Stellar i.e., Stellar and FuelCell Energy go up and down completely randomly.
Pair Corralation between Stellar and FuelCell Energy
Assuming the 90 days trading horizon Stellar is expected to generate 1.11 times more return on investment than FuelCell Energy. However, Stellar is 1.11 times more volatile than FuelCell Energy. It trades about 0.17 of its potential returns per unit of risk. FuelCell Energy is currently generating about 0.07 per unit of risk. If you would invest 38.00 in Stellar on October 20, 2024 and sell it today you would earn a total of 11.00 from holding Stellar or generate 28.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Stellar vs. FuelCell Energy
Performance |
| Timeline |
| Stellar |
| FuelCell Energy |
Stellar and FuelCell Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stellar and FuelCell Energy
The main advantage of trading using opposite Stellar and FuelCell Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stellar 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 Stellar 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. JB Hunt Transport | FuelCell Energy vs. Vitec Software Group | FuelCell Energy vs. Zoom Video Communications | FuelCell Energy vs. Spirent Communications plc |
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 Stocks Directory module to find actively traded stocks across global markets.
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