Correlation Between Ballard Power and Quality Industrial

Can any of the company-specific risk be diversified away by investing in both Ballard Power and Quality Industrial 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 Ballard Power and Quality Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ballard Power Systems and Quality Industrial Corp, you can compare the effects of market volatilities on Ballard Power and Quality Industrial 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 Ballard Power with a short position of Quality Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ballard Power and Quality Industrial.

Diversification Opportunities for Ballard Power and Quality Industrial

0.07

Correlation Coefficient

Ballard Power  Quality Industrial

Significant diversification

The 3 months correlation between Ballard and Quality is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Ballard Power Systems and Quality Industrial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quality Industrial Corp and Ballard Power 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 Ballard Power Systems are associated (or correlated) with Quality Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quality Industrial Corp has no effect on the direction of Ballard Power i.e., Ballard Power and Quality Industrial go up and down completely randomly.

Pair Corralation between Ballard Power and Quality Industrial

Given the investment horizon of 90 days Ballard Power is expected to generate 2.94 times less return on investment than Quality Industrial. But when comparing it to its historical volatility, Ballard Power Systems is 3.23 times less risky than Quality Industrial. It trades about 0.27 of its potential returns per unit of risk. Quality Industrial Corp is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  4.00  in Quality Industrial Corp on September 12, 2024 and sell it today you would earn a total of  3.00  from holding Quality Industrial Corp or generate 75.0% return on investment over 90 days.

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

Ballard Power Systems  vs.  Quality Industrial Corp

Ballard Power Systems

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ballard Power Systems are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, Ballard Power is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Quality Industrial Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Quality Industrial Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Quality Industrial exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ballard Power and Quality Industrial

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

The idea behind Ballard Power Systems and Quality Industrial Corp 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.