Correlation Between FuelCell Energy and Ideal Power

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

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

Diversification Opportunities for FuelCell Energy and Ideal Power

0.3

Correlation Coefficient

FuelCell Energy  Ideal Power

Weak diversification

The 3 months correlation between FuelCell and Ideal is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding FuelCell Energy and Ideal Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ideal Power and FuelCell 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 FuelCell Energy are associated (or correlated) with Ideal Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ideal Power has no effect on the direction of FuelCell Energy i.e., FuelCell Energy and Ideal Power go up and down completely randomly.

Pair Corralation between FuelCell Energy and Ideal Power

Given the investment horizon of 90 days FuelCell Energy is expected to under-perform the Ideal Power. In addition to that, FuelCell Energy is 1.26 times more volatile than Ideal Power. It trades about -0.17 of its total potential returns per unit of risk. Ideal Power is currently generating about -0.03 per unit of volatility. If you would invest  631.00  in Ideal Power on November 28, 2024 and sell it today you would lose (86.00) from holding Ideal Power or give up 13.63% of portfolio value over 90 days.

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

FuelCell Energy  vs.  Ideal Power

FuelCell Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days FuelCell Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in March 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Ideal Power

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ideal Power has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with FuelCell Energy and Ideal Power

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

The idea behind FuelCell Energy and Ideal 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.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.