Correlation Between Bloom Energy and FuelCell Energy

Can any of the company-specific risk be diversified away by investing in both Bloom Energy and FuelCell Energy 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 FuelCell Energy 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 FuelCell Energy, you can compare the effects of market volatilities on Bloom Energy and FuelCell Energy 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 FuelCell Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bloom Energy and FuelCell Energy.

Diversification Opportunities for Bloom Energy and FuelCell Energy

-0.37

Correlation Coefficient

Bloom Energy  FuelCell Energy

Very good diversification

The 3 months correlation between Bloom and FuelCell is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Bloom Energy Corp and FuelCell Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FuelCell Energy 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 FuelCell Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FuelCell Energy has no effect on the direction of Bloom Energy i.e., Bloom Energy and FuelCell Energy go up and down completely randomly.

Pair Corralation between Bloom Energy and FuelCell Energy

Allowing for the 90-day total investment horizon Bloom Energy Corp is expected to generate 1.06 times more return on investment than FuelCell Energy. However, Bloom Energy is 1.06 times more volatile than FuelCell Energy. It trades about 0.2 of its potential returns per unit of risk. FuelCell Energy is currently generating about 0.04 per unit of risk. If you would invest  1,102  in Bloom Energy Corp on September 2, 2024 and sell it today you would earn a total of  1,643  from holding Bloom Energy Corp or generate 149.09% return on investment over 90 days.

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

Bloom Energy Corp  vs.  FuelCell Energy

Bloom Energy Corp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bloom Energy Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, Bloom Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

FuelCell Energy

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in FuelCell Energy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady technical and fundamental indicators, FuelCell Energy disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bloom Energy and FuelCell Energy

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

The idea behind Bloom Energy Corp and FuelCell Energy 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.