Correlation Between FuelCell Energy and Flux Power

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

By analyzing existing cross correlation between FuelCell Energy and Flux Power Holdings, you can compare the effects of market volatilities on FuelCell Energy and Flux Power 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 Flux Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of FuelCell Energy and Flux Power.

Diversification Opportunities for FuelCell Energy and Flux Power

0.42

Correlation Coefficient

FuelCell Energy  Flux Power

Very weak diversification

The 3 months correlation between FuelCell and Flux is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding FuelCell Energy and Flux Power Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flux Power Holdings 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 Flux Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flux Power Holdings has no effect on the direction of FuelCell Energy i.e., FuelCell Energy and Flux Power go up and down completely randomly.

Pair Corralation between FuelCell Energy and Flux Power

Given the investment horizon of 90 days FuelCell Energy is expected to under-perform the Flux Power. In addition to that, FuelCell Energy is 1.1 times more volatile than Flux Power Holdings. It trades about -0.21 of its total potential returns per unit of risk. Flux Power Holdings is currently generating about 0.04 per unit of volatility. If you would invest  416.00  in Flux Power Holdings on January 25, 2024 and sell it today you would earn a total of  10.00  from holding Flux Power Holdings or generate 2.4% return on investment over 90 days.

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

FuelCell Energy  vs.  Flux Power Holdings

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 May 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Flux Power Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Flux Power Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with FuelCell Energy and Flux Power

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

The idea behind FuelCell Energy and Flux Power Holdings 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.