Correlation Between DIVERSIFIED ROYALTY and Bloom Energy

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

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

Diversification Opportunities for DIVERSIFIED ROYALTY and Bloom Energy

0.12

Correlation Coefficient

DIVERSIFIED ROYALTY  Bloom Energy

Average diversification

The 3 months correlation between DIVERSIFIED and Bloom is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding DIVERSIFIED ROYALTY and Bloom Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bloom Energy and DIVERSIFIED ROYALTY 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 DIVERSIFIED ROYALTY are associated (or correlated) with Bloom Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bloom Energy has no effect on the direction of DIVERSIFIED ROYALTY i.e., DIVERSIFIED ROYALTY and Bloom Energy go up and down completely randomly.

Pair Corralation between DIVERSIFIED ROYALTY and Bloom Energy

Assuming the 90 days horizon DIVERSIFIED ROYALTY is expected to generate 28.25 times less return on investment than Bloom Energy. But when comparing it to its historical volatility, DIVERSIFIED ROYALTY is 5.57 times less risky than Bloom Energy. It trades about 0.04 of its potential returns per unit of risk. Bloom Energy is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  915.00  in Bloom Energy on October 7, 2024 and sell it today you would earn a total of  1,424  from holding Bloom Energy or generate 155.63% return on investment over 90 days.

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

DIVERSIFIED ROYALTY  vs.  Bloom Energy

DIVERSIFIED ROYALTY

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DIVERSIFIED ROYALTY are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, DIVERSIFIED ROYALTY is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Bloom Energy

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bloom Energy are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Bloom Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DIVERSIFIED ROYALTY and Bloom Energy

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

The idea behind DIVERSIFIED ROYALTY and Bloom 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.