Correlation Between Solus Advanced and SK IE

Can any of the company-specific risk be diversified away by investing in both Solus Advanced and SK IE 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 Solus Advanced and SK IE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Solus Advanced Materials and SK IE Technology, you can compare the effects of market volatilities on Solus Advanced and SK IE 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 Solus Advanced with a short position of SK IE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solus Advanced and SK IE.

Diversification Opportunities for Solus Advanced and SK IE

0.93

Correlation Coefficient

Solus Advanced  SK IE

Almost no diversification

The 3 months correlation between Solus and 361610 is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Solus Advanced Materials and SK IE Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SK IE Technology and Solus Advanced 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 Solus Advanced Materials are associated (or correlated) with SK IE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SK IE Technology has no effect on the direction of Solus Advanced i.e., Solus Advanced and SK IE go up and down completely randomly.

Pair Corralation between Solus Advanced and SK IE

Assuming the 90 days trading horizon Solus Advanced Materials is expected to under-perform the SK IE. But the stock apears to be less risky and, when comparing its historical volatility, Solus Advanced Materials is 1.42 times less risky than SK IE. The stock trades about -0.23 of its potential returns per unit of risk. The SK IE Technology is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  3,375,000  in SK IE Technology on September 2, 2024 and sell it today you would lose (750,000) from holding SK IE Technology or give up 22.22% of portfolio value over 90 days.

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

Solus Advanced Materials  vs.  SK IE Technology

Solus Advanced Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solus Advanced Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

SK IE Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SK IE Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Solus Advanced and SK IE

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

The idea behind Solus Advanced Materials and SK IE Technology 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.