Correlation Between Fusion Fuel and Clearway Energy

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

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

Diversification Opportunities for Fusion Fuel and Clearway Energy

0.32

Correlation Coefficient

Fusion Fuel  Clearway Energy

Weak diversification

The 3 months correlation between Fusion and Clearway is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Fusion Fuel Green and Clearway Energy Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearway Energy Class and Fusion Fuel 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 Fusion Fuel Green are associated (or correlated) with Clearway Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clearway Energy Class has no effect on the direction of Fusion Fuel i.e., Fusion Fuel and Clearway Energy go up and down completely randomly.

Pair Corralation between Fusion Fuel and Clearway Energy

Assuming the 90 days horizon Fusion Fuel Green is expected to generate 9.89 times more return on investment than Clearway Energy. However, Fusion Fuel is 9.89 times more volatile than Clearway Energy Class. It trades about 0.02 of its potential returns per unit of risk. Clearway Energy Class is currently generating about 0.05 per unit of risk. If you would invest  4.10  in Fusion Fuel Green on September 1, 2024 and sell it today you would lose (2.65) from holding Fusion Fuel Green or give up 64.63% of portfolio value over 90 days.

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

Fusion Fuel Green  vs.  Clearway Energy Class

Fusion Fuel Green

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fusion Fuel Green are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Fusion Fuel showed solid returns over the last few months and may actually be approaching a breakup point.

Clearway Energy Class

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Clearway Energy Class are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Clearway Energy is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Fusion Fuel and Clearway Energy

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

The idea behind Fusion Fuel Green and Clearway Energy Class 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.