Correlation Between Bloom Energy and Timken

Can any of the company-specific risk be diversified away by investing in both Bloom Energy and Timken 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 Timken 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 Timken Company, you can compare the effects of market volatilities on Bloom Energy and Timken 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 Timken. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bloom Energy and Timken.

Diversification Opportunities for Bloom Energy and Timken

-0.74

Correlation Coefficient

Bloom Energy  Timken

Pay attention - limited upside

The 3 months correlation between Bloom and Timken is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Bloom Energy Corp and Timken Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Timken Company 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 Timken. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Timken Company has no effect on the direction of Bloom Energy i.e., Bloom Energy and Timken go up and down completely randomly.

Pair Corralation between Bloom Energy and Timken

Allowing for the 90-day total investment horizon Bloom Energy Corp is expected to generate 3.29 times more return on investment than Timken. However, Bloom Energy is 3.29 times more volatile than Timken Company. It trades about 0.06 of its potential returns per unit of risk. Timken Company is currently generating about -0.01 per unit of risk. If you would invest  1,476  in Bloom Energy Corp on September 25, 2024 and sell it today you would earn a total of  959.50  from holding Bloom Energy Corp or generate 65.01% return on investment over 90 days.

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

Bloom Energy Corp  vs.  Timken Company

Bloom Energy Corp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bloom Energy Corp are ranked lower than 15 (%) 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.

Timken Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Timken Company has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest uncertain performance, the Stock's forward-looking signals remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Bloom Energy and Timken

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

The idea behind Bloom Energy Corp and Timken Company 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.