Correlation Between Solution Advanced and GS Engineering

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

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

Diversification Opportunities for Solution Advanced and GS Engineering

0.29

Correlation Coefficient

Solution Advanced  GS Engineering

Modest diversification

The 3 months correlation between Solution and 006360 is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Solution Advanced Technology and GS Engineering Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GS Engineering Const and Solution 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 Solution Advanced Technology are associated (or correlated) with GS Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GS Engineering Const has no effect on the direction of Solution Advanced i.e., Solution Advanced and GS Engineering go up and down completely randomly.

Pair Corralation between Solution Advanced and GS Engineering

Assuming the 90 days trading horizon Solution Advanced Technology is expected to generate 3.4 times more return on investment than GS Engineering. However, Solution Advanced is 3.4 times more volatile than GS Engineering Construction. It trades about 0.18 of its potential returns per unit of risk. GS Engineering Construction is currently generating about 0.0 per unit of risk. If you would invest  137,500  in Solution Advanced Technology on December 26, 2024 and sell it today you would earn a total of  110,500  from holding Solution Advanced Technology or generate 80.36% return on investment over 90 days.

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

Solution Advanced Technology  vs.  GS Engineering Construction

Solution Advanced

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Solution Advanced Technology are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Solution Advanced sustained solid returns over the last few months and may actually be approaching a breakup point.

GS Engineering Const

Risk-Adjusted Performance

Very Weak

Over the last 90 days GS Engineering Construction has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, GS Engineering is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Solution Advanced and GS Engineering

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

The idea behind Solution Advanced Technology and GS Engineering Construction 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.