Correlation Between Powell Industries and Bloom Energy

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

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

Diversification Opportunities for Powell Industries and Bloom Energy

0.32

Correlation Coefficient

Powell Industries  Bloom Energy

Weak diversification

The 3 months correlation between Powell and Bloom is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Powell Industries 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 Powell Industries 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 Powell Industries 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 Powell Industries i.e., Powell Industries and Bloom Energy go up and down completely randomly.

Pair Corralation between Powell Industries and Bloom Energy

Given the investment horizon of 90 days Powell Industries is expected to generate 0.98 times more return on investment than Bloom Energy. However, Powell Industries is 1.02 times less risky than Bloom Energy. It trades about 0.11 of its potential returns per unit of risk. Bloom Energy Corp is currently generating about 0.04 per unit of risk. If you would invest  3,411  in Powell Industries on September 14, 2024 and sell it today you would earn a total of  22,165  from holding Powell Industries or generate 649.81% return on investment over 90 days.

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

Powell Industries  vs.  Bloom Energy Corp

Powell Industries

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Powell Industries are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Powell Industries disclosed solid returns over the last few months and may actually be approaching a breakup point.

Bloom Energy Corp

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bloom Energy Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, Bloom Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Powell Industries and Bloom Energy

The main advantage of trading using opposite Powell Industries and Bloom Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Powell Industries 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 Powell Industries 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.