Correlation Between Palo Alto and Fluence Energy

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

By analyzing existing cross correlation between Palo Alto Networks and Fluence Energy, you can compare the effects of market volatilities on Palo Alto and Fluence 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 Palo Alto with a short position of Fluence Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Palo Alto and Fluence Energy.

Diversification Opportunities for Palo Alto and Fluence Energy

-0.56

Correlation Coefficient

Palo Alto  Fluence Energy

Excellent diversification

The 3 months correlation between Palo and Fluence is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Palo Alto Networks and Fluence Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fluence Energy and Palo Alto 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 Palo Alto Networks are associated (or correlated) with Fluence Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fluence Energy has no effect on the direction of Palo Alto i.e., Palo Alto and Fluence Energy go up and down completely randomly.

Pair Corralation between Palo Alto and Fluence Energy

Given the investment horizon of 90 days Palo Alto Networks is expected to generate 0.36 times more return on investment than Fluence Energy. However, Palo Alto Networks is 2.78 times less risky than Fluence Energy. It trades about 0.06 of its potential returns per unit of risk. Fluence Energy is currently generating about -0.08 per unit of risk. If you would invest  18,118  in Palo Alto Networks on September 26, 2024 and sell it today you would earn a total of  833.00  from holding Palo Alto Networks or generate 4.6% return on investment over 90 days.

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

Palo Alto Networks  vs.  Fluence Energy

Palo Alto Networks

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Palo Alto Networks are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Palo Alto may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Fluence Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fluence Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Palo Alto and Fluence Energy

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

The idea behind Palo Alto Networks and Fluence Energy 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.