Correlation Between Azure Power and Fusion Fuel

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

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

Diversification Opportunities for Azure Power and Fusion Fuel

0.36

Correlation Coefficient

Azure Power  Fusion Fuel

Weak diversification

The 3 months correlation between Azure and Fusion is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Azure Power Global and Fusion Fuel Green in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fusion Fuel Green and Azure 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 Azure Power Global are associated (or correlated) with Fusion Fuel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fusion Fuel Green has no effect on the direction of Azure Power i.e., Azure Power and Fusion Fuel go up and down completely randomly.

Pair Corralation between Azure Power and Fusion Fuel

Assuming the 90 days horizon Azure Power Global is expected to generate 1.51 times more return on investment than Fusion Fuel. However, Azure Power is 1.51 times more volatile than Fusion Fuel Green. It trades about 0.06 of its potential returns per unit of risk. Fusion Fuel Green is currently generating about 0.0 per unit of risk. If you would invest  50.00  in Azure Power Global on April 25, 2025 and sell it today you would lose (10.00) from holding Azure Power Global or give up 20.0% of portfolio value over 90 days.

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

Azure Power Global  vs.  Fusion Fuel Green

Azure Power Global

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Azure Power Global are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal technical and fundamental indicators, Azure Power reported solid returns over the last few months and may actually be approaching a breakup point.

Fusion Fuel Green

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fusion Fuel Green has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Fusion Fuel is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Azure Power and Fusion Fuel

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

The idea behind Azure Power Global and Fusion Fuel Green 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.