Correlation Between Advanced Emissions and Fuel Tech

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Can any of the company-specific risk be diversified away by investing in both Advanced Emissions 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 Advanced Emissions and Fuel Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advanced Emissions Solutions and Fuel Tech, you can compare the effects of market volatilities on Advanced Emissions 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 Advanced Emissions with a short position of Fuel Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Emissions and Fuel Tech.

Diversification Opportunities for Advanced Emissions and Fuel Tech

0.55
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Advanced and Fuel is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Emissions Solutions and Fuel Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fuel Tech and Advanced Emissions 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 Advanced Emissions Solutions 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 Advanced Emissions i.e., Advanced Emissions and Fuel Tech go up and down completely randomly.

Pair Corralation between Advanced Emissions and Fuel Tech

If you would invest  111.00  in Fuel Tech on December 29, 2023 and sell it today you would earn a total of  11.00  from holding Fuel Tech or generate 9.91% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy4.55%
ValuesDaily Returns

Advanced Emissions Solutions  vs.  Fuel Tech

 Performance 
       Timeline  
Advanced Emissions 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
OK
Over the last 90 days Advanced Emissions Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively fragile technical and fundamental indicators, Advanced Emissions unveiled solid returns over the last few months and may actually be approaching a breakup point.
Fuel Tech 

Risk-Adjusted Performance

8 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Fuel Tech are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Fuel Tech disclosed solid returns over the last few months and may actually be approaching a breakup point.

Advanced Emissions and Fuel Tech Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Advanced Emissions and Fuel Tech

The main advantage of trading using opposite Advanced Emissions and Fuel Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Emissions 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 Advanced Emissions Solutions 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.
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.

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