Correlation Between FuelCell Energy and Chrysalis Investments

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

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

Diversification Opportunities for FuelCell Energy and Chrysalis Investments

0.3

Correlation Coefficient

FuelCell Energy  Chrysalis Investments

Weak diversification

The 3 months correlation between FuelCell and Chrysalis is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding FuelCell Energy and Chrysalis Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chrysalis Investments 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 Chrysalis Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chrysalis Investments has no effect on the direction of FuelCell Energy i.e., FuelCell Energy and Chrysalis Investments go up and down completely randomly.

Pair Corralation between FuelCell Energy and Chrysalis Investments

Assuming the 90 days trading horizon FuelCell Energy is expected to generate 24.88 times more return on investment than Chrysalis Investments. However, FuelCell Energy is 24.88 times more volatile than Chrysalis Investments. It trades about 0.1 of its potential returns per unit of risk. Chrysalis Investments is currently generating about 0.03 per unit of risk. If you would invest  12,705  in FuelCell Energy on October 24, 2024 and sell it today you would lose (11,801) from holding FuelCell Energy or give up 92.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.2%
Values	Daily Returns

FuelCell Energy  vs.  Chrysalis Investments

FuelCell Energy

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FuelCell Energy are ranked lower than 2 (%) 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.

Chrysalis Investments

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chrysalis Investments are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Chrysalis Investments may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with FuelCell Energy and Chrysalis Investments

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

The idea behind FuelCell Energy and Chrysalis Investments 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.