Correlation Between Leroy Seafood and FuelCell Energy

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

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

Diversification Opportunities for Leroy Seafood and FuelCell Energy

0.13

Correlation Coefficient

Leroy Seafood  FuelCell Energy

Average diversification

The 3 months correlation between Leroy and FuelCell is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Leroy Seafood Group and FuelCell Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FuelCell Energy and Leroy Seafood 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 Leroy Seafood Group are associated (or correlated) with FuelCell Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FuelCell Energy has no effect on the direction of Leroy Seafood i.e., Leroy Seafood and FuelCell Energy go up and down completely randomly.

Pair Corralation between Leroy Seafood and FuelCell Energy

Assuming the 90 days trading horizon Leroy Seafood Group is expected to under-perform the FuelCell Energy. But the stock apears to be less risky and, when comparing its historical volatility, Leroy Seafood Group is 4.88 times less risky than FuelCell Energy. The stock trades about -0.18 of its potential returns per unit of risk. The FuelCell Energy is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,120  in FuelCell Energy on October 8, 2024 and sell it today you would earn a total of  72.00  from holding FuelCell Energy or generate 6.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Leroy Seafood Group  vs.  FuelCell Energy

Leroy Seafood Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Leroy Seafood Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Leroy Seafood is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

FuelCell Energy

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FuelCell Energy are ranked lower than 5 (%) 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.

Pair Trading with Leroy Seafood and FuelCell Energy

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

The idea behind Leroy Seafood Group and FuelCell Energy 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.