Correlation Between Solar Applied and Ruentex Materials

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

Diversification Opportunities for Solar Applied and Ruentex Materials

0.59

Correlation Coefficient

Solar Applied  Ruentex Materials

Very weak diversification

The 3 months correlation between Solar and Ruentex is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Solar Applied Materials and Ruentex Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ruentex Materials 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 Ruentex Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ruentex Materials has no effect on the direction of Solar Applied i.e., Solar Applied and Ruentex Materials go up and down completely randomly.

Pair Corralation between Solar Applied and Ruentex Materials

Assuming the 90 days trading horizon Solar Applied is expected to generate 2.19 times less return on investment than Ruentex Materials. In addition to that, Solar Applied is 2.4 times more volatile than Ruentex Materials Co. It trades about 0.1 of its total potential returns per unit of risk. Ruentex Materials Co is currently generating about 0.53 per unit of volatility. If you would invest  2,390  in Ruentex Materials Co on December 4, 2024 and sell it today you would earn a total of  165.00  from holding Ruentex Materials Co or generate 6.9% 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.  Ruentex Materials Co

Solar Applied Materials

Risk-Adjusted Performance

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.

Ruentex Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ruentex Materials Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Ruentex Materials 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 Ruentex Materials

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

The idea behind Solar Applied Materials and Ruentex Materials Co 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.