Correlation Between CHINA HUARONG and FuelCell Energy

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

By analyzing existing cross correlation between CHINA HUARONG ENERHD 50 and FuelCell Energy, you can compare the effects of market volatilities on CHINA HUARONG and FuelCell 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 CHINA HUARONG with a short position of FuelCell Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA HUARONG and FuelCell Energy.

Diversification Opportunities for CHINA HUARONG and FuelCell Energy

-0.48

Correlation Coefficient

CHINA HUARONG  FuelCell Energy

Very good diversification

The 3 months correlation between CHINA and FuelCell is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding CHINA HUARONG ENERHD 50 and FuelCell Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FuelCell Energy and CHINA HUARONG 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 CHINA HUARONG ENERHD 50 are associated (or correlated) with FuelCell Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FuelCell Energy has no effect on the direction of CHINA HUARONG i.e., CHINA HUARONG and FuelCell Energy go up and down completely randomly.

Pair Corralation between CHINA HUARONG and FuelCell Energy

Assuming the 90 days trading horizon CHINA HUARONG is expected to generate 1.12 times less return on investment than FuelCell Energy. In addition to that, CHINA HUARONG is 1.9 times more volatile than FuelCell Energy. It trades about 0.07 of its total potential returns per unit of risk. FuelCell Energy is currently generating about 0.15 per unit of volatility. If you would invest  806.00  in FuelCell Energy on September 23, 2024 and sell it today you would earn a total of  177.00  from holding FuelCell Energy or generate 21.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

CHINA HUARONG ENERHD 50  vs.  FuelCell Energy

CHINA HUARONG ENERHD

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA HUARONG ENERHD 50 are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, CHINA HUARONG reported solid returns over the last few months and may actually be approaching a breakup point.

FuelCell Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FuelCell Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, FuelCell Energy is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with CHINA HUARONG and FuelCell Energy

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

The idea behind CHINA HUARONG ENERHD 50 and FuelCell Energy 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.