Correlation Between Bloom Energy and China Natural

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

By analyzing existing cross correlation between Bloom Energy Corp and China Natural Resources, you can compare the effects of market volatilities on Bloom Energy and China Natural 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 Bloom Energy with a short position of China Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bloom Energy and China Natural.

Diversification Opportunities for Bloom Energy and China Natural

-0.59

Correlation Coefficient

Bloom Energy  China Natural

Excellent diversification

The 3 months correlation between Bloom and China is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Bloom Energy Corp and China Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Natural Resources and Bloom 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 Bloom Energy Corp are associated (or correlated) with China Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Natural Resources has no effect on the direction of Bloom Energy i.e., Bloom Energy and China Natural go up and down completely randomly.

Pair Corralation between Bloom Energy and China Natural

Allowing for the 90-day total investment horizon Bloom Energy is expected to generate 1.37 times less return on investment than China Natural. But when comparing it to its historical volatility, Bloom Energy Corp is 2.53 times less risky than China Natural. It trades about 0.03 of its potential returns per unit of risk. China Natural Resources is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  189.00  in China Natural Resources on September 20, 2024 and sell it today you would lose (133.00) from holding China Natural Resources or give up 70.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

Bloom Energy Corp  vs.  China Natural Resources

Bloom Energy Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bloom Energy Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Bloom Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

China Natural Resources

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Natural Resources are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, China Natural may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bloom Energy and China Natural

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

The idea behind Bloom Energy Corp and China Natural Resources 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.