Correlation Between Fuel Tech and PCT

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

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

Diversification Opportunities for Fuel Tech and PCT

-0.23

Correlation Coefficient

Fuel Tech  PCT

Very good diversification

The 3 months correlation between Fuel and PCT is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Fuel Tech and PCT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PCT 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 PCT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PCT has no effect on the direction of Fuel Tech i.e., Fuel Tech and PCT go up and down completely randomly.

Pair Corralation between Fuel Tech and PCT

If you would invest  97.00  in Fuel Tech on September 5, 2024 and sell it today you would earn a total of  6.00  from holding Fuel Tech or generate 6.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.19%
Values	Daily Returns

Fuel Tech  vs.  PCT

Fuel Tech

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fuel Tech are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain technical and fundamental indicators, Fuel Tech may actually be approaching a critical reversion point that can send shares even higher in January 2025.

PCT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PCT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, PCT is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Fuel Tech and PCT

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

The idea behind Fuel Tech and PCT 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.