Correlation Between Automobile and Solution Advanced

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

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

Diversification Opportunities for Automobile and Solution Advanced

0.51

Correlation Coefficient

Automobile  Solution Advanced

Very weak diversification

The 3 months correlation between Automobile and Solution is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Automobile Pc and Solution Advanced Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solution Advanced and Automobile 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 Automobile Pc are associated (or correlated) with Solution Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solution Advanced has no effect on the direction of Automobile i.e., Automobile and Solution Advanced go up and down completely randomly.

Pair Corralation between Automobile and Solution Advanced

Assuming the 90 days trading horizon Automobile Pc is expected to generate 0.73 times more return on investment than Solution Advanced. However, Automobile Pc is 1.38 times less risky than Solution Advanced. It trades about -0.13 of its potential returns per unit of risk. Solution Advanced Technology is currently generating about -0.1 per unit of risk. If you would invest  64,100  in Automobile Pc on October 6, 2024 and sell it today you would lose (4,800) from holding Automobile Pc or give up 7.49% of portfolio value over 90 days.

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

Automobile Pc  vs.  Solution Advanced Technology

Automobile Pc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Automobile Pc 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 basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Solution Advanced

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solution Advanced Technology 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 basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Automobile and Solution Advanced

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

The idea behind Automobile Pc and Solution Advanced Technology 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.