Correlation Between Bloom Energy and Waste Management

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

Diversification Opportunities for Bloom Energy and Waste Management

0.72

Correlation Coefficient

Bloom Energy  Waste Management

Poor diversification

The 3 months correlation between Bloom and Waste is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Bloom Energy Corp and Waste Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Management 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 Waste Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waste Management has no effect on the direction of Bloom Energy i.e., Bloom Energy and Waste Management go up and down completely randomly.

Pair Corralation between Bloom Energy and Waste Management

Allowing for the 90-day total investment horizon Bloom Energy Corp is expected to generate 15.2 times more return on investment than Waste Management. However, Bloom Energy is 15.2 times more volatile than Waste Management. It trades about 0.43 of its potential returns per unit of risk. Waste Management is currently generating about 0.3 per unit of risk. If you would invest  960.00  in Bloom Energy Corp on September 1, 2024 and sell it today you would earn a total of  1,785  from holding Bloom Energy Corp or generate 185.94% return on investment over 90 days.

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

Bloom Energy Corp  vs.  Waste Management

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.

Waste Management

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Management are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent primary indicators, Waste Management may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Bloom Energy and Waste Management

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

The idea behind Bloom Energy Corp and Waste Management 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.