Correlation Between FuelCell Energy and Edinburgh Investment

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

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

Diversification Opportunities for FuelCell Energy and Edinburgh Investment

0.5

Correlation Coefficient

FuelCell Energy  Edinburgh Investment

Very weak diversification

The 3 months correlation between FuelCell and Edinburgh is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding FuelCell Energy and Edinburgh Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edinburgh Investment 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 Edinburgh Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edinburgh Investment has no effect on the direction of FuelCell Energy i.e., FuelCell Energy and Edinburgh Investment go up and down completely randomly.

Pair Corralation between FuelCell Energy and Edinburgh Investment

Assuming the 90 days trading horizon FuelCell Energy is expected to generate 143.84 times more return on investment than Edinburgh Investment. However, FuelCell Energy is 143.84 times more volatile than Edinburgh Investment Trust. It trades about 0.1 of its potential returns per unit of risk. Edinburgh Investment Trust is currently generating about 0.04 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	Weak
Accuracy	99.4%
Values	Daily Returns

FuelCell Energy  vs.  Edinburgh Investment Trust

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.

Edinburgh Investment

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Edinburgh Investment Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Edinburgh Investment is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with FuelCell Energy and Edinburgh Investment

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

The idea behind FuelCell Energy and Edinburgh Investment Trust 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.