Correlation Between Ballard Power and ITM Power

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

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

Diversification Opportunities for Ballard Power and ITM Power

0.8

Correlation Coefficient

Ballard Power  ITM Power

Very poor diversification

The 3 months correlation between Ballard and ITM is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Ballard Power Systems and ITM Power Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITM Power Plc and Ballard 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 Ballard Power Systems are associated (or correlated) with ITM Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITM Power Plc has no effect on the direction of Ballard Power i.e., Ballard Power and ITM Power go up and down completely randomly.

Pair Corralation between Ballard Power and ITM Power

Assuming the 90 days horizon Ballard Power Systems is expected to under-perform the ITM Power. But the stock apears to be less risky and, when comparing its historical volatility, Ballard Power Systems is 1.08 times less risky than ITM Power. The stock trades about -0.09 of its potential returns per unit of risk. The ITM Power Plc is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  43.00  in ITM Power Plc on December 28, 2024 and sell it today you would lose (11.00) from holding ITM Power Plc or give up 25.58% of portfolio value over 90 days.

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

Ballard Power Systems  vs.  ITM Power Plc

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. Despite fragile 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.

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 fragile 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 Ballard Power and ITM Power

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

The idea behind Ballard Power Systems and ITM Power Plc 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.