Correlation Between Fuel Tech and Matrix Service

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

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

Diversification Opportunities for Fuel Tech and Matrix Service

0.38

Correlation Coefficient

Fuel Tech  Matrix Service

Weak diversification

The 3 months correlation between Fuel and Matrix is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Fuel Tech and Matrix Service Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matrix Service and Fuel Tech 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 Fuel Tech are associated (or correlated) with Matrix Service. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matrix Service has no effect on the direction of Fuel Tech i.e., Fuel Tech and Matrix Service go up and down completely randomly.

Pair Corralation between Fuel Tech and Matrix Service

Given the investment horizon of 90 days Fuel Tech is expected to generate 0.87 times more return on investment than Matrix Service. However, Fuel Tech is 1.14 times less risky than Matrix Service. It trades about -0.09 of its potential returns per unit of risk. Matrix Service Co is currently generating about -0.22 per unit of risk. If you would invest  108.00  in Fuel Tech on September 27, 2024 and sell it today you would lose (4.00) from holding Fuel Tech or give up 3.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Fuel Tech  vs.  Matrix Service Co

Fuel Tech

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fuel Tech are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, Fuel Tech is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Matrix Service

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Matrix Service Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Matrix Service may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Fuel Tech and Matrix Service

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

The idea behind Fuel Tech and Matrix Service Co 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.