Correlation Between FuelCell Energy and Blue Star

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

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

Diversification Opportunities for FuelCell Energy and Blue Star

0.25

Correlation Coefficient

FuelCell Energy  Blue Star

Modest diversification

The 3 months correlation between FuelCell and Blue is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding FuelCell Energy and Blue Star Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Star Capital 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 Blue Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Star Capital has no effect on the direction of FuelCell Energy i.e., FuelCell Energy and Blue Star go up and down completely randomly.

Pair Corralation between FuelCell Energy and Blue Star

Assuming the 90 days trading horizon FuelCell Energy is expected to generate 2.42 times more return on investment than Blue Star. However, FuelCell Energy is 2.42 times more volatile than Blue Star Capital. It trades about 0.1 of its potential returns per unit of risk. Blue Star Capital is currently generating about 0.03 per unit of risk. If you would invest  9,330  in FuelCell Energy on October 10, 2024 and sell it today you would lose (8,149) from holding FuelCell Energy or give up 87.34% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

FuelCell Energy  vs.  Blue Star Capital

FuelCell Energy

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FuelCell Energy are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, FuelCell Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Blue Star Capital

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Star Capital are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Blue Star exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FuelCell Energy and Blue Star

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

The idea behind FuelCell Energy and Blue Star Capital 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.