Correlation Between Playgram and Solus Advanced

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

By analyzing existing cross correlation between Playgram Co and Solus Advanced Materials, you can compare the effects of market volatilities on Playgram and Solus Advanced 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 Playgram with a short position of Solus Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Playgram and Solus Advanced.

Diversification Opportunities for Playgram and Solus Advanced

0.24

Correlation Coefficient

Playgram  Solus Advanced

Modest diversification

The 3 months correlation between Playgram and Solus is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Playgram Co and Solus Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solus Advanced Materials and Playgram 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 Playgram Co are associated (or correlated) with Solus Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solus Advanced Materials has no effect on the direction of Playgram i.e., Playgram and Solus Advanced go up and down completely randomly.

Pair Corralation between Playgram and Solus Advanced

Assuming the 90 days trading horizon Playgram Co is expected to under-perform the Solus Advanced. But the stock apears to be less risky and, when comparing its historical volatility, Playgram Co is 1.23 times less risky than Solus Advanced. The stock trades about -0.03 of its potential returns per unit of risk. The Solus Advanced Materials is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  861,960  in Solus Advanced Materials on December 1, 2024 and sell it today you would earn a total of  70,040  from holding Solus Advanced Materials or generate 8.13% return on investment over 90 days.

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

Playgram Co  vs.  Solus Advanced Materials

Playgram

Risk-Adjusted Performance

Very Weak

Over the last 90 days Playgram Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Solus Advanced Materials

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Solus Advanced Materials are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Solus Advanced sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Playgram and Solus Advanced

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

The idea behind Playgram Co and Solus Advanced Materials 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.