Correlation Between CBAK Energy and Plug Power

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

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

Diversification Opportunities for CBAK Energy and Plug Power

0.5

Correlation Coefficient

CBAK Energy  Plug Power

Very weak diversification

The 3 months correlation between CBAK and Plug is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding CBAK Energy Technology and Plug Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plug Power and CBAK 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 CBAK Energy Technology are associated (or correlated) with Plug Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plug Power has no effect on the direction of CBAK Energy i.e., CBAK Energy and Plug Power go up and down completely randomly.

Pair Corralation between CBAK Energy and Plug Power

Given the investment horizon of 90 days CBAK Energy Technology is expected to under-perform the Plug Power. But the stock apears to be less risky and, when comparing its historical volatility, CBAK Energy Technology is 1.44 times less risky than Plug Power. The stock trades about 0.0 of its potential returns per unit of risk. The Plug Power is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  188.00  in Plug Power on August 30, 2024 and sell it today you would earn a total of  25.00  from holding Plug Power or generate 13.3% return on investment over 90 days.

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

CBAK Energy Technology  vs.  Plug Power

CBAK Energy Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CBAK Energy Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, CBAK Energy is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Plug Power

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Plug Power are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Plug Power reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CBAK Energy and Plug Power

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

The idea behind CBAK Energy Technology and Plug Power 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.