Correlation Between Veralto and Fuel Tech

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

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

Diversification Opportunities for Veralto and Fuel Tech

-0.12

Correlation Coefficient

Veralto  Fuel Tech

Good diversification

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

Pair Corralation between Veralto and Fuel Tech

Given the investment horizon of 90 days Veralto is expected to under-perform the Fuel Tech. But the stock apears to be less risky and, when comparing its historical volatility, Veralto is 2.11 times less risky than Fuel Tech. The stock trades about -0.08 of its potential returns per unit of risk. The Fuel Tech is currently generating about -0.04 of returns per unit of risk over similar time horizon. 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

Veralto  vs.  Fuel Tech

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.

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.

Pair Trading with Veralto and Fuel Tech

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

The idea behind Veralto and Fuel Tech 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.