Correlation Between Electrovaya Common and FuelCell Energy

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

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

Diversification Opportunities for Electrovaya Common and FuelCell Energy

0.76

Correlation Coefficient

Electrovaya Common  FuelCell Energy

Poor diversification

The 3 months correlation between Electrovaya and FuelCell is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Electrovaya Common Shares and FuelCell Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FuelCell Energy and Electrovaya Common 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 Electrovaya Common Shares 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 Electrovaya Common i.e., Electrovaya Common and FuelCell Energy go up and down completely randomly.

Pair Corralation between Electrovaya Common and FuelCell Energy

Given the investment horizon of 90 days Electrovaya Common Shares is expected to generate 0.57 times more return on investment than FuelCell Energy. However, Electrovaya Common Shares is 1.74 times less risky than FuelCell Energy. It trades about -0.08 of its potential returns per unit of risk. FuelCell Energy is currently generating about -0.18 per unit of risk. If you would invest  340.00  in Electrovaya Common Shares on February 6, 2024 and sell it today you would lose (21.00) from holding Electrovaya Common Shares or give up 6.18% of portfolio value over 90 days.

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

Electrovaya Common Shares  vs.  FuelCell Energy

Electrovaya Common Shares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Electrovaya Common Shares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

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. Despite uncertain performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in June 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Electrovaya Common and FuelCell Energy

The main advantage of trading using opposite Electrovaya Common and FuelCell Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electrovaya Common 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 Electrovaya Common Shares 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.