Correlation Between Fuel Tech and Veralto

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

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

Diversification Opportunities for Fuel Tech and Veralto

-0.12

Correlation Coefficient

Fuel Tech  Veralto

Good diversification

The 3 months correlation between Fuel and Veralto is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Fuel Tech and Veralto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veralto 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 Veralto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Veralto has no effect on the direction of Fuel Tech i.e., Fuel Tech and Veralto go up and down completely randomly.

Pair Corralation between Fuel Tech and Veralto

Given the investment horizon of 90 days Fuel Tech is expected to generate 2.11 times more return on investment than Veralto. However, Fuel Tech is 2.11 times more volatile than Veralto. It trades about -0.04 of its potential returns per unit of risk. Veralto is currently generating about -0.08 per unit of risk. If you would invest  108.00  in Fuel Tech on September 20, 2024 and sell it today you would lose (7.00) from holding Fuel Tech or give up 6.48% of portfolio value over 90 days.

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

Fuel Tech  vs.  Veralto

Fuel Tech

Risk-Adjusted Performance

0 of 100

Very Weak

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

Veralto

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Veralto has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Veralto is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Fuel Tech and Veralto

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

The idea behind Fuel Tech and Veralto 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.