Correlation Between Hydrogen Engine and ADS TEC

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

By analyzing existing cross correlation between Hydrogen Engine Center and ADS TEC ENERGY PLC, you can compare the effects of market volatilities on Hydrogen Engine and ADS TEC 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 Hydrogen Engine with a short position of ADS TEC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hydrogen Engine and ADS TEC.

Diversification Opportunities for Hydrogen Engine and ADS TEC

-0.52

Correlation Coefficient

Hydrogen Engine  ADS TEC

Excellent diversification

The 3 months correlation between Hydrogen and ADS is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Hydrogen Engine Center and ADS TEC ENERGY PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADS TEC ENERGY and Hydrogen Engine 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 Hydrogen Engine Center are associated (or correlated) with ADS TEC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADS TEC ENERGY has no effect on the direction of Hydrogen Engine i.e., Hydrogen Engine and ADS TEC go up and down completely randomly.

Pair Corralation between Hydrogen Engine and ADS TEC

Given the investment horizon of 90 days Hydrogen Engine Center is expected to generate 4.7 times more return on investment than ADS TEC. However, Hydrogen Engine is 4.7 times more volatile than ADS TEC ENERGY PLC. It trades about 0.07 of its potential returns per unit of risk. ADS TEC ENERGY PLC is currently generating about 0.12 per unit of risk. If you would invest  0.35  in Hydrogen Engine Center on September 12, 2024 and sell it today you would lose (0.31) from holding Hydrogen Engine Center or give up 88.57% of portfolio value over 90 days.

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

Hydrogen Engine Center  vs.  ADS TEC ENERGY PLC

Hydrogen Engine Center

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hydrogen Engine Center are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Hydrogen Engine reported solid returns over the last few months and may actually be approaching a breakup point.

ADS TEC ENERGY

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ADS TEC ENERGY PLC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent technical and fundamental indicators, ADS TEC showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hydrogen Engine and ADS TEC

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

The idea behind Hydrogen Engine Center and ADS TEC ENERGY PLC 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.