Correlation Between Plug Power and Bloom Energy

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

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

Diversification Opportunities for Plug Power and Bloom Energy

0.56

Correlation Coefficient

Plug Power  Bloom Energy

Very weak diversification

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

Pair Corralation between Plug Power and Bloom Energy

Assuming the 90 days trading horizon Plug Power is expected to generate 3.27 times less return on investment than Bloom Energy. But when comparing it to its historical volatility, Plug Power is 1.5 times less risky than Bloom Energy. It trades about 0.04 of its potential returns per unit of risk. Bloom Energy is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,230  in Bloom Energy on September 23, 2024 and sell it today you would earn a total of  1,012  from holding Bloom Energy or generate 82.28% return on investment over 90 days.

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

Plug Power  vs.  Bloom Energy

Plug Power

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Plug Power are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Plug Power exhibited solid returns over the last few months and may actually be approaching a breakup point.

Bloom Energy

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bloom Energy are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Bloom Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Plug Power and Bloom Energy

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

The idea behind Plug Power and Bloom 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.

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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..