Correlation Between Solar Applied and S Tech

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

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

Diversification Opportunities for Solar Applied and S Tech

0.57

Correlation Coefficient

Solar Applied  S Tech

Very weak diversification

The 3 months correlation between Solar and 1584 is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Solar Applied Materials and S Tech Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on S Tech Corp and Solar Applied 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 Solar Applied Materials are associated (or correlated) with S Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of S Tech Corp has no effect on the direction of Solar Applied i.e., Solar Applied and S Tech go up and down completely randomly.

Pair Corralation between Solar Applied and S Tech

Assuming the 90 days trading horizon Solar Applied is expected to generate 2.85 times less return on investment than S Tech. But when comparing it to its historical volatility, Solar Applied Materials is 1.13 times less risky than S Tech. It trades about 0.01 of its potential returns per unit of risk. S Tech Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,760  in S Tech Corp on December 21, 2024 and sell it today you would earn a total of  75.00  from holding S Tech Corp or generate 2.72% return on investment over 90 days.

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

Solar Applied Materials  vs.  S Tech Corp

Solar Applied Materials

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Solar Applied Materials are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Solar Applied is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

S Tech Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in S Tech Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, S Tech is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Solar Applied and S Tech

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

The idea behind Solar Applied Materials and S Tech Corp 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.