Correlation Between DLH Holdings and Fuel Tech

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

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

Diversification Opportunities for DLH Holdings and Fuel Tech

0.9

Correlation Coefficient

DLH Holdings  Fuel Tech

Almost no diversification

The 3 months correlation between DLH and Fuel is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding DLH Holdings Corp and Fuel Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fuel Tech and DLH Holdings 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 DLH Holdings Corp 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 DLH Holdings i.e., DLH Holdings and Fuel Tech go up and down completely randomly.

Pair Corralation between DLH Holdings and Fuel Tech

Given the investment horizon of 90 days DLH Holdings is expected to generate 3.77 times less return on investment than Fuel Tech. But when comparing it to its historical volatility, DLH Holdings Corp is 2.58 times less risky than Fuel Tech. It trades about 0.2 of its potential returns per unit of risk. Fuel Tech is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  94.00  in Fuel Tech on May 6, 2025 and sell it today you would earn a total of  187.50  from holding Fuel Tech or generate 199.47% return on investment over 90 days.

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

DLH Holdings Corp  vs.  Fuel Tech

DLH Holdings Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DLH Holdings Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical indicators, DLH Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Fuel Tech

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fuel Tech are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent technical and fundamental indicators, Fuel Tech disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DLH Holdings and Fuel Tech

The main advantage of trading using opposite DLH Holdings and Fuel Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DLH Holdings 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 DLH Holdings Corp 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.