Correlation Between Fuel Tech and PagSeguro Digital

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

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

Diversification Opportunities for Fuel Tech and PagSeguro Digital

-0.45

Correlation Coefficient

Fuel Tech  PagSeguro Digital

Very good diversification

The 3 months correlation between Fuel and PagSeguro is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Fuel Tech and PagSeguro Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PagSeguro Digital and Fuel Tech 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 Fuel Tech are associated (or correlated) with PagSeguro Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PagSeguro Digital has no effect on the direction of Fuel Tech i.e., Fuel Tech and PagSeguro Digital go up and down completely randomly.

Pair Corralation between Fuel Tech and PagSeguro Digital

Given the investment horizon of 90 days Fuel Tech is expected to under-perform the PagSeguro Digital. But the stock apears to be less risky and, when comparing its historical volatility, Fuel Tech is 1.11 times less risky than PagSeguro Digital. The stock trades about -0.01 of its potential returns per unit of risk. The PagSeguro Digital is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  628.00  in PagSeguro Digital on January 3, 2025 and sell it today you would earn a total of  222.00  from holding PagSeguro Digital or generate 35.35% return on investment over 90 days.

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

Fuel Tech  vs.  PagSeguro Digital

Fuel Tech

Risk-Adjusted Performance

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.

PagSeguro Digital

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PagSeguro Digital are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, PagSeguro Digital unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fuel Tech and PagSeguro Digital

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

The idea behind Fuel Tech and PagSeguro Digital 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.