Correlation Between Arq and Fuel Tech

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

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

Diversification Opportunities for Arq and Fuel Tech

0.4

Correlation Coefficient

Arq  Fuel Tech

Very weak diversification

The 3 months correlation between Arq and Fuel is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Arq Inc and Fuel Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fuel Tech and Arq 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 Arq Inc 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 Arq i.e., Arq and Fuel Tech go up and down completely randomly.

Pair Corralation between Arq and Fuel Tech

Considering the 90-day investment horizon Arq Inc is expected to under-perform the Fuel Tech. But the stock apears to be less risky and, when comparing its historical volatility, Arq Inc is 1.13 times less risky than Fuel Tech. The stock trades about -0.26 of its potential returns per unit of risk. The Fuel Tech is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  107.00  in Fuel Tech on September 20, 2024 and sell it today you would lose (6.00) from holding Fuel Tech or give up 5.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Arq Inc  vs.  Fuel Tech

Arq Inc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arq Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Arq reported solid returns over the last few months and may actually be approaching a breakup point.

Fuel Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fuel Tech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Fuel Tech is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Arq and Fuel Tech

The main advantage of trading using opposite Arq and Fuel Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arq 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 Arq Inc 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.

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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.