Correlation Between Bloom Energy and Plug Power

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

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

Diversification Opportunities for Bloom Energy and Plug Power

0.03

Correlation Coefficient

Bloom Energy  Plug Power

Significant diversification

The 3 months correlation between Bloom and Plug is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Bloom Energy Corp and Plug Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plug Power and Bloom Energy 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 Bloom Energy Corp are associated (or correlated) with Plug Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plug Power has no effect on the direction of Bloom Energy i.e., Bloom Energy and Plug Power go up and down completely randomly.

Pair Corralation between Bloom Energy and Plug Power

Allowing for the 90-day total investment horizon Bloom Energy Corp is expected to generate 0.9 times more return on investment than Plug Power. However, Bloom Energy Corp is 1.11 times less risky than Plug Power. It trades about 0.16 of its potential returns per unit of risk. Plug Power is currently generating about -0.13 per unit of risk. If you would invest  1,142  in Bloom Energy Corp on February 10, 2024 and sell it today you would earn a total of  170.00  from holding Bloom Energy Corp or generate 14.89% return on investment over 90 days.

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

Bloom Energy Corp  vs.  Plug Power

Bloom Energy Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bloom Energy Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, Bloom Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Plug Power

Risk-Adjusted Performance

0 of 100

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 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Bloom Energy and Plug Power

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

The idea behind Bloom Energy Corp and Plug Power 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.