Correlation Between ESS Tech and Bloom Energy

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

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

Diversification Opportunities for ESS Tech and Bloom Energy

-0.69

Correlation Coefficient

ESS Tech  Bloom Energy

Excellent diversification

The 3 months correlation between ESS and Bloom is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding ESS Tech and Bloom Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bloom Energy Corp and ESS Tech 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 ESS Tech are associated (or correlated) with Bloom Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bloom Energy Corp has no effect on the direction of ESS Tech i.e., ESS Tech and Bloom Energy go up and down completely randomly.

Pair Corralation between ESS Tech and Bloom Energy

Considering the 90-day investment horizon ESS Tech is expected to under-perform the Bloom Energy. In addition to that, ESS Tech is 1.13 times more volatile than Bloom Energy Corp. It trades about -0.04 of its total potential returns per unit of risk. Bloom Energy Corp is currently generating about 0.04 per unit of volatility. If you would invest  2,480  in Bloom Energy Corp on November 20, 2024 and sell it today you would earn a total of  61.00  from holding Bloom Energy Corp or generate 2.46% return on investment over 90 days.

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

ESS Tech  vs.  Bloom Energy Corp

ESS Tech

Risk-Adjusted Performance

Very Weak

Over the last 90 days ESS Tech 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 basic indicators remain fairly strong which may send shares a bit higher in March 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Bloom Energy Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bloom Energy Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, Bloom Energy may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with ESS Tech and Bloom Energy

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

The idea behind ESS Tech and Bloom Energy Corp 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.