Correlation Between Plug Power and FuelCell Energy

Can any of the company-specific risk be diversified away by investing in both Plug Power and FuelCell 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 FuelCell 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 FuelCell Energy, you can compare the effects of market volatilities on Plug Power and FuelCell 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 FuelCell Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Plug Power and FuelCell Energy.

Diversification Opportunities for Plug Power and FuelCell Energy

0.9

Correlation Coefficient

Plug Power  FuelCell Energy

Almost no diversification

The 3 months correlation between Plug and FuelCell is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Plug Power and FuelCell Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FuelCell 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 FuelCell Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FuelCell Energy has no effect on the direction of Plug Power i.e., Plug Power and FuelCell Energy go up and down completely randomly.

Pair Corralation between Plug Power and FuelCell Energy

Given the investment horizon of 90 days Plug Power is expected to under-perform the FuelCell Energy. In addition to that, Plug Power is 1.36 times more volatile than FuelCell Energy. It trades about -0.16 of its total potential returns per unit of risk. FuelCell Energy is currently generating about -0.17 per unit of volatility. If you would invest  725.00  in FuelCell Energy on February 10, 2025 and sell it today you would lose (297.00) from holding FuelCell Energy or give up 40.97% of portfolio value over 90 days.

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

Plug Power  vs.  FuelCell Energy

Plug Power

Risk-Adjusted Performance

Very Weak

Over the last 90 days Plug Power has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in June 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

FuelCell Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days FuelCell Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in June 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Plug Power and FuelCell Energy

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

The idea behind Plug Power and FuelCell 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 Commodity Directory module to find actively traded commodities issued by global exchanges.