Correlation Between Bloom Energy and Powell Industries

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

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

Diversification Opportunities for Bloom Energy and Powell Industries

0.32

Correlation Coefficient

Bloom Energy  Powell Industries

Weak diversification

The 3 months correlation between Bloom and Powell is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Bloom Energy Corp and Powell Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Powell Industries and Bloom 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 Bloom Energy Corp are associated (or correlated) with Powell Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Powell Industries has no effect on the direction of Bloom Energy i.e., Bloom Energy and Powell Industries go up and down completely randomly.

Pair Corralation between Bloom Energy and Powell Industries

Allowing for the 90-day total investment horizon Bloom Energy Corp is expected to generate 2.13 times more return on investment than Powell Industries. However, Bloom Energy is 2.13 times more volatile than Powell Industries. It trades about 0.26 of its potential returns per unit of risk. Powell Industries is currently generating about -0.13 per unit of risk. If you would invest  1,360  in Bloom Energy Corp on September 14, 2024 and sell it today you would earn a total of  1,121  from holding Bloom Energy Corp or generate 82.43% return on investment over 90 days.

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

Bloom Energy Corp  vs.  Powell Industries

Bloom Energy Corp

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bloom Energy Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, Bloom Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Powell Industries

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Powell Industries are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Powell Industries disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bloom Energy and Powell Industries

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

The idea behind Bloom Energy Corp and Powell Industries 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.