Correlation Between FuelCell Energy and SCANSOURCE

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

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

Diversification Opportunities for FuelCell Energy and SCANSOURCE

-0.08

Correlation Coefficient

FuelCell Energy  SCANSOURCE

Good diversification

The 3 months correlation between FuelCell and SCANSOURCE is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding FuelCell Energy and SCANSOURCE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCANSOURCE and FuelCell 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 FuelCell Energy are associated (or correlated) with SCANSOURCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCANSOURCE has no effect on the direction of FuelCell Energy i.e., FuelCell Energy and SCANSOURCE go up and down completely randomly.

Pair Corralation between FuelCell Energy and SCANSOURCE

Assuming the 90 days trading horizon FuelCell Energy is expected to generate 1.43 times less return on investment than SCANSOURCE. In addition to that, FuelCell Energy is 3.93 times more volatile than SCANSOURCE. It trades about 0.01 of its total potential returns per unit of risk. SCANSOURCE is currently generating about 0.06 per unit of volatility. If you would invest  4,260  in SCANSOURCE on September 25, 2024 and sell it today you would earn a total of  320.00  from holding SCANSOURCE or generate 7.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

FuelCell Energy  vs.  SCANSOURCE

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 uncertain basic indicators, FuelCell Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

SCANSOURCE

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with FuelCell Energy and SCANSOURCE

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

The idea behind FuelCell Energy and SCANSOURCE 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.

Check out your portfolio center.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.