Correlation Between FuelCell Energy and Worldwide Healthcare

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

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

Diversification Opportunities for FuelCell Energy and Worldwide Healthcare

-0.26

Correlation Coefficient

FuelCell Energy  Worldwide Healthcare

Very good diversification

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

Pair Corralation between FuelCell Energy and Worldwide Healthcare

Assuming the 90 days trading horizon FuelCell Energy is expected to generate 9.3 times more return on investment than Worldwide Healthcare. However, FuelCell Energy is 9.3 times more volatile than Worldwide Healthcare Trust. It trades about 0.09 of its potential returns per unit of risk. Worldwide Healthcare Trust is currently generating about -0.12 per unit of risk. If you would invest  977.00  in FuelCell Energy on October 10, 2024 and sell it today you would earn a total of  326.00  from holding FuelCell Energy or generate 33.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

FuelCell Energy  vs.  Worldwide Healthcare Trust

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 unsteady basic indicators, FuelCell Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Worldwide Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Worldwide Healthcare Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with FuelCell Energy and Worldwide Healthcare

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

The idea behind FuelCell Energy and Worldwide Healthcare 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.