Correlation Between ITM Power and Ballard Power

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

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

Diversification Opportunities for ITM Power and Ballard Power

0.59

Correlation Coefficient

ITM Power  Ballard Power

Very weak diversification

The 3 months correlation between ITM and Ballard is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding ITM Power Plc and Ballard Power Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ballard Power Systems and ITM 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 ITM Power Plc are associated (or correlated) with Ballard Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ballard Power Systems has no effect on the direction of ITM Power i.e., ITM Power and Ballard Power go up and down completely randomly.

Pair Corralation between ITM Power and Ballard Power

Assuming the 90 days horizon ITM Power Plc is expected to generate 1.09 times more return on investment than Ballard Power. However, ITM Power is 1.09 times more volatile than Ballard Power Systems. It trades about -0.01 of its potential returns per unit of risk. Ballard Power Systems is currently generating about -0.11 per unit of risk. If you would invest  41.00  in ITM Power Plc on December 28, 2024 and sell it today you would lose (4.00) from holding ITM Power Plc or give up 9.76% of portfolio value over 90 days.

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

ITM Power Plc  vs.  Ballard Power Systems

ITM Power Plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days ITM Power Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ITM Power is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Ballard Power Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ballard Power Systems 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 fundamental 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.

Pair Trading with ITM Power and Ballard Power

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

The idea behind ITM Power Plc and Ballard Power Systems 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.