Correlation Between ADS TEC and FuelCell Energy

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

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

Diversification Opportunities for ADS TEC and FuelCell Energy

0.53

Correlation Coefficient

ADS TEC  FuelCell Energy

Very weak diversification

The 3 months correlation between ADS and FuelCell is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding ADS TEC ENERGY PLC and FuelCell Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FuelCell Energy and ADS TEC 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 ADS TEC ENERGY PLC 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 ADS TEC i.e., ADS TEC and FuelCell Energy go up and down completely randomly.

Pair Corralation between ADS TEC and FuelCell Energy

Assuming the 90 days horizon ADS TEC ENERGY PLC is expected to generate 1.12 times more return on investment than FuelCell Energy. However, ADS TEC is 1.12 times more volatile than FuelCell Energy. It trades about 0.0 of its potential returns per unit of risk. FuelCell Energy is currently generating about -0.19 per unit of risk. If you would invest  365.00  in ADS TEC ENERGY PLC on December 28, 2024 and sell it today you would lose (35.00) from holding ADS TEC ENERGY PLC or give up 9.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

ADS TEC ENERGY PLC  vs.  FuelCell Energy

ADS TEC ENERGY

Risk-Adjusted Performance

Very Weak

Over the last 90 days ADS TEC ENERGY PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, ADS TEC is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

FuelCell Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days FuelCell Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with ADS TEC and FuelCell Energy

The main advantage of trading using opposite ADS TEC and FuelCell Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ADS TEC 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 ADS TEC ENERGY PLC 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.