Correlation Between FuelCell Energy and Overstock

Can any of the company-specific risk be diversified away by investing in both FuelCell Energy and Overstock 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 FuelCell Energy and Overstock into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FuelCell Energy and Overstock, you can compare the effects of market volatilities on FuelCell Energy and Overstock 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 FuelCell Energy with a short position of Overstock. Check out your portfolio center. Please also check ongoing floating volatility patterns of FuelCell Energy and Overstock.

Diversification Opportunities for FuelCell Energy and Overstock

0.26

Correlation Coefficient

FuelCell Energy  Overstock

Modest diversification

The 3 months correlation between FuelCell and Overstock is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding FuelCell Energy and Overstock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Overstock and FuelCell Energy 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 FuelCell Energy are associated (or correlated) with Overstock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Overstock has no effect on the direction of FuelCell Energy i.e., FuelCell Energy and Overstock go up and down completely randomly.

Pair Corralation between FuelCell Energy and Overstock

Assuming the 90 days trading horizon FuelCell Energy is expected to under-perform the Overstock. But the stock apears to be less risky and, when comparing its historical volatility, FuelCell Energy is 1.02 times less risky than Overstock. The stock trades about -0.11 of its potential returns per unit of risk. The Overstock is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  650.00  in Overstock on December 2, 2024 and sell it today you would lose (16.00) from holding Overstock or give up 2.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	64.06%
Values	Daily Returns

FuelCell Energy  vs.  Overstock

FuelCell Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days FuelCell Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Overstock

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Overstock are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Overstock may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with FuelCell Energy and Overstock

The main advantage of trading using opposite FuelCell Energy and Overstock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FuelCell Energy position performs unexpectedly, Overstock 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 Overstock will offset losses from the drop in Overstock's long position.

The idea behind FuelCell Energy and Overstock 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.

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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.