Correlation Between ENGlobal and Fuel Tech

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

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

Diversification Opportunities for ENGlobal and Fuel Tech

0.0

Correlation Coefficient

ENGlobal  Fuel Tech

Pay attention - limited upside

The 3 months correlation between ENGlobal and Fuel is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding ENGlobal and Fuel Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fuel Tech and ENGlobal 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 ENGlobal are associated (or correlated) with Fuel Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fuel Tech has no effect on the direction of ENGlobal i.e., ENGlobal and Fuel Tech go up and down completely randomly.

Pair Corralation between ENGlobal and Fuel Tech

If you would invest  105.00  in Fuel Tech on December 28, 2024 and sell it today you would lose (2.00) from holding Fuel Tech or give up 1.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

ENGlobal  vs.  Fuel Tech

ENGlobal

Risk-Adjusted Performance

Very Weak

Over the last 90 days ENGlobal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ENGlobal is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Fuel Tech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fuel Tech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Fuel Tech is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with ENGlobal and Fuel Tech

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

The idea behind ENGlobal and Fuel Tech 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.