Correlation Between Ideal Power and Bloom Energy

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

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

Diversification Opportunities for Ideal Power and Bloom Energy

-0.13

Correlation Coefficient

Ideal Power  Bloom Energy

Good diversification

The 3 months correlation between Ideal and Bloom is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Ideal Power 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 Ideal Power 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 Ideal Power 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 Ideal Power i.e., Ideal Power and Bloom Energy go up and down completely randomly.

Pair Corralation between Ideal Power and Bloom Energy

Given the investment horizon of 90 days Ideal Power is expected to under-perform the Bloom Energy. But the stock apears to be less risky and, when comparing its historical volatility, Ideal Power is 1.37 times less risky than Bloom Energy. The stock trades about -0.05 of its potential returns per unit of risk. The Bloom Energy Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,046  in Bloom Energy Corp on December 5, 2024 and sell it today you would earn a total of  1,296  from holding Bloom Energy Corp or generate 123.9% return on investment over 90 days.

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

Ideal Power  vs.  Bloom Energy Corp

Ideal Power

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ideal Power has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Bloom Energy Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bloom Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Bloom Energy is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ideal Power and Bloom Energy

The main advantage of trading using opposite Ideal Power and Bloom Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ideal Power 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 Ideal Power 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.