Correlation Between Solar Applied and Farglory Life

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

Diversification Opportunities for Solar Applied and Farglory Life

0.2

Correlation Coefficient

Solar Applied  Farglory Life

Modest diversification

The 3 months correlation between Solar and Farglory is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Solar Applied Materials and Farglory Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farglory Life Insurance 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 Farglory Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farglory Life Insurance has no effect on the direction of Solar Applied i.e., Solar Applied and Farglory Life go up and down completely randomly.

Pair Corralation between Solar Applied and Farglory Life

Assuming the 90 days trading horizon Solar Applied Materials is expected to under-perform the Farglory Life. But the stock apears to be less risky and, when comparing its historical volatility, Solar Applied Materials is 13.08 times less risky than Farglory Life. The stock trades about -0.04 of its potential returns per unit of risk. The Farglory Life Insurance is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,750  in Farglory Life Insurance on October 8, 2024 and sell it today you would lose (80.00) from holding Farglory Life Insurance or give up 4.57% of portfolio value over 90 days.

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

Solar Applied Materials  vs.  Farglory Life Insurance

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 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.

Farglory Life Insurance

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Farglory Life Insurance are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Farglory Life showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Solar Applied and Farglory Life

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

The idea behind Solar Applied Materials and Farglory Life Insurance 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.