Correlation Between First National and Powertap Hydrogen

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

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

Diversification Opportunities for First National and Powertap Hydrogen

0.02

Correlation Coefficient

First National  Powertap Hydrogen

Significant diversification

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

Pair Corralation between First National and Powertap Hydrogen

Given the investment horizon of 90 days First National Energy is expected to generate 1.31 times more return on investment than Powertap Hydrogen. However, First National is 1.31 times more volatile than Powertap Hydrogen Capital. It trades about -0.01 of its potential returns per unit of risk. Powertap Hydrogen Capital is currently generating about -0.13 per unit of risk. If you would invest  9.06  in First National Energy on December 29, 2024 and sell it today you would lose (6.39) from holding First National Energy or give up 70.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.31%
Values	Daily Returns

First National Energy  vs.  Powertap Hydrogen Capital

First National Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days First National Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Powertap Hydrogen Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Powertap Hydrogen Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with First National and Powertap Hydrogen

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

The idea behind First National Energy and Powertap Hydrogen Capital 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.