Correlation Between COSTCO WHOLESALE and FuelCell Energy

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

By analyzing existing cross correlation between COSTCO WHOLESALE CDR and FuelCell Energy, you can compare the effects of market volatilities on COSTCO WHOLESALE 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 COSTCO WHOLESALE with a short position of FuelCell Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of COSTCO WHOLESALE and FuelCell Energy.

Diversification Opportunities for COSTCO WHOLESALE and FuelCell Energy

0.03

Correlation Coefficient

COSTCO WHOLESALE  FuelCell Energy

Significant diversification

The 3 months correlation between COSTCO and FuelCell is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding COSTCO WHOLESALE CDR and FuelCell Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FuelCell Energy and COSTCO WHOLESALE 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 COSTCO WHOLESALE CDR 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 COSTCO WHOLESALE i.e., COSTCO WHOLESALE and FuelCell Energy go up and down completely randomly.

Pair Corralation between COSTCO WHOLESALE and FuelCell Energy

Assuming the 90 days trading horizon COSTCO WHOLESALE CDR is expected to generate 0.21 times more return on investment than FuelCell Energy. However, COSTCO WHOLESALE CDR is 4.82 times less risky than FuelCell Energy. It trades about -0.06 of its potential returns per unit of risk. FuelCell Energy is currently generating about -0.05 per unit of risk. If you would invest  3,000  in COSTCO WHOLESALE CDR on September 24, 2024 and sell it today you would lose (60.00) from holding COSTCO WHOLESALE CDR or give up 2.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

COSTCO WHOLESALE CDR  vs.  FuelCell Energy

COSTCO WHOLESALE CDR

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in COSTCO WHOLESALE CDR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, COSTCO WHOLESALE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

FuelCell Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FuelCell Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, FuelCell Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with COSTCO WHOLESALE and FuelCell Energy

The main advantage of trading using opposite COSTCO WHOLESALE and FuelCell Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COSTCO WHOLESALE 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 COSTCO WHOLESALE CDR 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.