Correlation Between FuelCell Energy and Acuity Brands

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

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

Diversification Opportunities for FuelCell Energy and Acuity Brands

-0.27

Correlation Coefficient

FuelCell Energy  Acuity Brands

Very good diversification

The 3 months correlation between FuelCell and Acuity is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding FuelCell Energy and Acuity Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acuity Brands and FuelCell Energy 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 FuelCell Energy are associated (or correlated) with Acuity Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acuity Brands has no effect on the direction of FuelCell Energy i.e., FuelCell Energy and Acuity Brands go up and down completely randomly.

Pair Corralation between FuelCell Energy and Acuity Brands

Given the investment horizon of 90 days FuelCell Energy is expected to under-perform the Acuity Brands. In addition to that, FuelCell Energy is 3.78 times more volatile than Acuity Brands. It trades about -0.17 of its total potential returns per unit of risk. Acuity Brands is currently generating about -0.11 per unit of volatility. If you would invest  26,434  in Acuity Brands on February 4, 2024 and sell it today you would lose (993.00) from holding Acuity Brands or give up 3.76% of portfolio value over 90 days.

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

FuelCell Energy  vs.  Acuity Brands

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 weak 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.

Acuity Brands

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Acuity Brands are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Acuity Brands may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with FuelCell Energy and Acuity Brands

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

The idea behind FuelCell Energy and Acuity Brands 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.

Check out your portfolio center.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.