Correlation Between FuelCell Energy and MACOM Technology

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

By analyzing existing cross correlation between FuelCell Energy and MACOM Technology Solutions, you can compare the effects of market volatilities on FuelCell Energy and MACOM Technology 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 MACOM Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of FuelCell Energy and MACOM Technology.

Diversification Opportunities for FuelCell Energy and MACOM Technology

-0.02

Correlation Coefficient

FuelCell Energy  MACOM Technology

Good diversification

The 3 months correlation between FuelCell and MACOM is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding FuelCell Energy and MACOM Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MACOM Technology Sol 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 MACOM Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MACOM Technology Sol has no effect on the direction of FuelCell Energy i.e., FuelCell Energy and MACOM Technology go up and down completely randomly.

Pair Corralation between FuelCell Energy and MACOM Technology

Assuming the 90 days trading horizon FuelCell Energy is expected to generate 3.98 times more return on investment than MACOM Technology. However, FuelCell Energy is 3.98 times more volatile than MACOM Technology Solutions. It trades about -0.02 of its potential returns per unit of risk. MACOM Technology Solutions is currently generating about -0.15 per unit of risk. If you would invest  1,024  in FuelCell Energy on October 4, 2024 and sell it today you would lose (76.00) from holding FuelCell Energy or give up 7.42% of portfolio value over 90 days.

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

FuelCell Energy  vs.  MACOM Technology Solutions

FuelCell Energy

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FuelCell Energy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, FuelCell Energy reported solid returns over the last few months and may actually be approaching a breakup point.

MACOM Technology Sol

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MACOM Technology Solutions are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, MACOM Technology reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FuelCell Energy and MACOM Technology

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

The idea behind FuelCell Energy and MACOM Technology Solutions 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.