Correlation Between Bin Chuan and Solar Applied

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

By analyzing existing cross correlation between Bin Chuan Enterprise and Solar Applied Materials, you can compare the effects of market volatilities on Bin Chuan and Solar Applied 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 Bin Chuan with a short position of Solar Applied. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bin Chuan and Solar Applied.

Diversification Opportunities for Bin Chuan and Solar Applied

0.23

Correlation Coefficient

Bin Chuan  Solar Applied

Modest diversification

The 3 months correlation between Bin and Solar is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Bin Chuan Enterprise and Solar Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solar Applied Materials and Bin Chuan 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 Bin Chuan Enterprise are associated (or correlated) with Solar Applied. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solar Applied Materials has no effect on the direction of Bin Chuan i.e., Bin Chuan and Solar Applied go up and down completely randomly.

Pair Corralation between Bin Chuan and Solar Applied

Assuming the 90 days trading horizon Bin Chuan Enterprise is expected to generate 2.5 times more return on investment than Solar Applied. However, Bin Chuan is 2.5 times more volatile than Solar Applied Materials. It trades about 0.16 of its potential returns per unit of risk. Solar Applied Materials is currently generating about 0.05 per unit of risk. If you would invest  5,320  in Bin Chuan Enterprise on December 27, 2024 and sell it today you would earn a total of  2,520  from holding Bin Chuan Enterprise or generate 47.37% return on investment over 90 days.

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

Bin Chuan Enterprise  vs.  Solar Applied Materials

Bin Chuan Enterprise

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bin Chuan Enterprise are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Bin Chuan showed solid returns over the last few months and may actually be approaching a breakup point.

Solar Applied Materials

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Solar Applied Materials are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Solar Applied may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Bin Chuan and Solar Applied

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

The idea behind Bin Chuan Enterprise and Solar Applied 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.