Correlation Between Fuel Tech and 374Water Common

Can any of the company-specific risk be diversified away by investing in both Fuel Tech and 374Water Common 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 Fuel Tech and 374Water Common into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fuel Tech and 374Water Common Stock, you can compare the effects of market volatilities on Fuel Tech and 374Water Common 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 Fuel Tech with a short position of 374Water Common. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fuel Tech and 374Water Common.

Diversification Opportunities for Fuel Tech and 374Water Common

0.32

Correlation Coefficient

Fuel Tech  374Water Common

Weak diversification

The 3 months correlation between Fuel and 374Water is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Fuel Tech and 374Water Common Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 374Water Common Stock and Fuel Tech 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 Fuel Tech are associated (or correlated) with 374Water Common. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 374Water Common Stock has no effect on the direction of Fuel Tech i.e., Fuel Tech and 374Water Common go up and down completely randomly.

Pair Corralation between Fuel Tech and 374Water Common

Given the investment horizon of 90 days Fuel Tech is expected to generate 1.72 times less return on investment than 374Water Common. But when comparing it to its historical volatility, Fuel Tech is 1.82 times less risky than 374Water Common. It trades about 0.08 of its potential returns per unit of risk. 374Water Common Stock is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  116.00  in 374Water Common Stock on February 19, 2024 and sell it today you would earn a total of  19.00  from holding 374Water Common Stock or generate 16.38% return on investment over 90 days.

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

Fuel Tech  vs.  374Water Common Stock

Fuel Tech

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fuel Tech are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Fuel Tech may actually be approaching a critical reversion point that can send shares even higher in June 2024.

374Water Common Stock

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in 374Water Common Stock are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, 374Water Common displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fuel Tech and 374Water Common

The main advantage of trading using opposite Fuel Tech and 374Water Common positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fuel Tech position performs unexpectedly, 374Water Common 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 374Water Common will offset losses from the drop in 374Water Common's long position.

The idea behind Fuel Tech and 374Water Common Stock 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.