Correlation Between Aker Carbon and Fuel Tech

Can any of the company-specific risk be diversified away by investing in both Aker Carbon and Fuel Tech 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 Aker Carbon and Fuel Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aker Carbon Capture and Fuel Tech, you can compare the effects of market volatilities on Aker Carbon and Fuel Tech 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 Aker Carbon with a short position of Fuel Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aker Carbon and Fuel Tech.

Diversification Opportunities for Aker Carbon and Fuel Tech

0.14

Correlation Coefficient

Aker Carbon  Fuel Tech

Average diversification

The 3 months correlation between Aker and Fuel is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Aker Carbon Capture and Fuel Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fuel Tech and Aker Carbon 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 Aker Carbon Capture are associated (or correlated) with Fuel Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fuel Tech has no effect on the direction of Aker Carbon i.e., Aker Carbon and Fuel Tech go up and down completely randomly.

Pair Corralation between Aker Carbon and Fuel Tech

Assuming the 90 days horizon Aker Carbon Capture is expected to under-perform the Fuel Tech. In addition to that, Aker Carbon is 2.86 times more volatile than Fuel Tech. It trades about -0.06 of its total potential returns per unit of risk. Fuel Tech is currently generating about 0.0 per unit of volatility. If you would invest  105.00  in Fuel Tech on December 28, 2024 and sell it today you would lose (2.00) from holding Fuel Tech or give up 1.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Aker Carbon Capture  vs.  Fuel Tech

Aker Carbon Capture

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aker Carbon Capture has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Fuel Tech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fuel Tech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Fuel Tech is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Aker Carbon and Fuel Tech

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

The idea behind Aker Carbon Capture and Fuel Tech 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.