Correlation Between Solar Applied and Chia Yi

Can any of the company-specific risk be diversified away by investing in both Solar Applied and Chia Yi 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 Chia Yi 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 Chia Yi Steel, you can compare the effects of market volatilities on Solar Applied and Chia Yi 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 Chia Yi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solar Applied and Chia Yi.

Diversification Opportunities for Solar Applied and Chia Yi

-0.36

Correlation Coefficient

Solar Applied  Chia Yi

Very good diversification

The 3 months correlation between Solar and Chia is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Solar Applied Materials and Chia Yi Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chia Yi Steel 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 Chia Yi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chia Yi Steel has no effect on the direction of Solar Applied i.e., Solar Applied and Chia Yi go up and down completely randomly.

Pair Corralation between Solar Applied and Chia Yi

Assuming the 90 days trading horizon Solar Applied Materials is expected to under-perform the Chia Yi. But the stock apears to be less risky and, when comparing its historical volatility, Solar Applied Materials is 1.62 times less risky than Chia Yi. The stock trades about -0.05 of its potential returns per unit of risk. The Chia Yi Steel is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,020  in Chia Yi Steel on October 21, 2024 and sell it today you would earn a total of  80.00  from holding Chia Yi Steel or generate 7.84% return on investment over 90 days.

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

Solar Applied Materials  vs.  Chia Yi Steel

Solar Applied Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solar Applied Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Chia Yi Steel

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Solar Applied and Chia Yi

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

The idea behind Solar Applied Materials and Chia Yi Steel 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.