Correlation Between Advent Wireless and Ballard Power

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

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

Diversification Opportunities for Advent Wireless and Ballard Power

-0.58

Correlation Coefficient

Advent Wireless  Ballard Power

Excellent diversification

The 3 months correlation between Advent and Ballard is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Advent Wireless and Ballard Power Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ballard Power Systems and Advent Wireless 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 Advent Wireless are associated (or correlated) with Ballard Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ballard Power Systems has no effect on the direction of Advent Wireless i.e., Advent Wireless and Ballard Power go up and down completely randomly.

Pair Corralation between Advent Wireless and Ballard Power

Assuming the 90 days horizon Advent Wireless is expected to generate 1.25 times more return on investment than Ballard Power. However, Advent Wireless is 1.25 times more volatile than Ballard Power Systems. It trades about 0.05 of its potential returns per unit of risk. Ballard Power Systems is currently generating about -0.1 per unit of risk. If you would invest  69.00  in Advent Wireless on September 3, 2024 and sell it today you would earn a total of  14.00  from holding Advent Wireless or generate 20.29% return on investment over 90 days.

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

Advent Wireless  vs.  Ballard Power Systems

Advent Wireless

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Advent Wireless are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Advent Wireless showed solid returns over the last few months and may actually be approaching a breakup point.

Ballard Power Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ballard Power Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Ballard Power is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Advent Wireless and Ballard Power

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

The idea behind Advent Wireless and Ballard Power Systems 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.