Correlation Between Plug Power and Emera Incorporated

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

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

Diversification Opportunities for Plug Power and Emera Incorporated

0.09

Correlation Coefficient

Plug Power  Emera Incorporated

Significant diversification

The 3 months correlation between Plug and Emera is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Plug Power and Emera Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emera Incorporated and Plug Power 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 Plug Power are associated (or correlated) with Emera Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emera Incorporated has no effect on the direction of Plug Power i.e., Plug Power and Emera Incorporated go up and down completely randomly.

Pair Corralation between Plug Power and Emera Incorporated

Given the investment horizon of 90 days Plug Power is expected to under-perform the Emera Incorporated. In addition to that, Plug Power is 10.24 times more volatile than Emera Incorporated. It trades about -0.14 of its total potential returns per unit of risk. Emera Incorporated is currently generating about 0.03 per unit of volatility. If you would invest  1,585  in Emera Incorporated on February 12, 2024 and sell it today you would earn a total of  15.00  from holding Emera Incorporated or generate 0.95% return on investment over 90 days.

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

Plug Power  vs.  Emera Incorporated

Plug Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Plug Power has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Emera Incorporated

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Emera Incorporated are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Emera Incorporated is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Plug Power and Emera Incorporated

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

The idea behind Plug Power and Emera Incorporated 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.