Correlation Between FTC Solar and SunHydrogen

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

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

Diversification Opportunities for FTC Solar and SunHydrogen

0.2

Correlation Coefficient

FTC Solar  SunHydrogen

Modest diversification

The 3 months correlation between FTC and SunHydrogen is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding FTC Solar and SunHydrogen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SunHydrogen and FTC Solar 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 FTC Solar are associated (or correlated) with SunHydrogen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SunHydrogen has no effect on the direction of FTC Solar i.e., FTC Solar and SunHydrogen go up and down completely randomly.

Pair Corralation between FTC Solar and SunHydrogen

Given the investment horizon of 90 days FTC Solar is expected to generate 2.2 times more return on investment than SunHydrogen. However, FTC Solar is 2.2 times more volatile than SunHydrogen. It trades about 0.09 of its potential returns per unit of risk. SunHydrogen is currently generating about 0.04 per unit of risk. If you would invest  217.00  in FTC Solar on September 5, 2024 and sell it today you would earn a total of  86.00  from holding FTC Solar or generate 39.63% return on investment over 90 days.

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

FTC Solar  vs.  SunHydrogen

FTC Solar

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FTC Solar are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, FTC Solar demonstrated solid returns over the last few months and may actually be approaching a breakup point.

SunHydrogen

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SunHydrogen are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, SunHydrogen reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FTC Solar and SunHydrogen

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

The idea behind FTC Solar and SunHydrogen 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.