Correlation Between Vow ASA and Fuel Tech

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

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

Diversification Opportunities for Vow ASA and Fuel Tech

-0.57

Correlation Coefficient

Vow ASA  Fuel Tech

Excellent diversification

The 3 months correlation between Vow and Fuel is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Vow ASA and Fuel Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fuel Tech and Vow ASA 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 Vow ASA are associated (or correlated) with Fuel Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fuel Tech has no effect on the direction of Vow ASA i.e., Vow ASA and Fuel Tech go up and down completely randomly.

Pair Corralation between Vow ASA and Fuel Tech

Assuming the 90 days horizon Vow ASA is expected to under-perform the Fuel Tech. In addition to that, Vow ASA is 2.19 times more volatile than Fuel Tech. It trades about -0.21 of its total potential returns per unit of risk. Fuel Tech is currently generating about 0.04 per unit of volatility. If you would invest  100.00  in Fuel Tech on September 12, 2024 and sell it today you would earn a total of  2.00  from holding Fuel Tech or generate 2.0% return on investment over 90 days.

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

Vow ASA  vs.  Fuel Tech

Vow ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vow ASA 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 January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Fuel Tech

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fuel Tech are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, Fuel Tech is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Vow ASA and Fuel Tech

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

The idea behind Vow ASA and Fuel Tech 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.