Correlation Between FuelCell Energy and Alfen NV

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

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

Diversification Opportunities for FuelCell Energy and Alfen NV

0.19

Correlation Coefficient

FuelCell Energy  Alfen NV

Average diversification

The 3 months correlation between FuelCell and Alfen is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding FuelCell Energy and Alfen NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alfen NV 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 Alfen NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alfen NV has no effect on the direction of FuelCell Energy i.e., FuelCell Energy and Alfen NV go up and down completely randomly.

Pair Corralation between FuelCell Energy and Alfen NV

Assuming the 90 days trading horizon FuelCell Energy is expected to generate 4.53 times more return on investment than Alfen NV. However, FuelCell Energy is 4.53 times more volatile than Alfen NV. It trades about 0.03 of its potential returns per unit of risk. Alfen NV is currently generating about -0.11 per unit of risk. If you would invest  1,055  in FuelCell Energy on September 26, 2024 and sell it today you would lose (95.00) from holding FuelCell Energy or give up 9.0% of portfolio value over 90 days.

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

FuelCell Energy  vs.  Alfen NV

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.

Alfen NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alfen NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with FuelCell Energy and Alfen NV

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

The idea behind FuelCell Energy and Alfen NV 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.