Correlation Between Bloom Energy and Legrand SA

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

Diversification Opportunities for Bloom Energy and Legrand SA

-0.92

Correlation Coefficient

Bloom Energy  Legrand SA

Pay attention - limited upside

The 3 months correlation between Bloom and Legrand is -0.92. Overlapping area represents the amount of risk that can be diversified away by holding Bloom Energy Corp and Legrand SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legrand SA ADR 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 Legrand SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legrand SA ADR has no effect on the direction of Bloom Energy i.e., Bloom Energy and Legrand SA go up and down completely randomly.

Pair Corralation between Bloom Energy and Legrand SA

Allowing for the 90-day total investment horizon Bloom Energy Corp is expected to generate 6.0 times more return on investment than Legrand SA. However, Bloom Energy is 6.0 times more volatile than Legrand SA ADR. It trades about 0.21 of its potential returns per unit of risk. Legrand SA ADR is currently generating about -0.14 per unit of risk. If you would invest  978.00  in Bloom Energy Corp on September 16, 2024 and sell it today you would earn a total of  1,581  from holding Bloom Energy Corp or generate 161.66% return on investment over 90 days.

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

Bloom Energy Corp  vs.  Legrand SA ADR

Bloom Energy Corp

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bloom Energy Corp are ranked lower than 16 (%) 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.

Legrand SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Legrand SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Bloom Energy and Legrand SA

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

The idea behind Bloom Energy Corp and Legrand SA ADR 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.