Correlation Between Solution Advanced and Eagon Industrial

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

Diversification Opportunities for Solution Advanced and Eagon Industrial

-0.5

Correlation Coefficient

Solution Advanced  Eagon Industrial

Very good diversification

The 3 months correlation between Solution and Eagon is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Solution Advanced Technology and Eagon Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagon Industrial 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 Eagon Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagon Industrial has no effect on the direction of Solution Advanced i.e., Solution Advanced and Eagon Industrial go up and down completely randomly.

Pair Corralation between Solution Advanced and Eagon Industrial

Assuming the 90 days trading horizon Solution Advanced Technology is expected to under-perform the Eagon Industrial. But the stock apears to be less risky and, when comparing its historical volatility, Solution Advanced Technology is 1.51 times less risky than Eagon Industrial. The stock trades about -0.06 of its potential returns per unit of risk. The Eagon Industrial Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  492,346  in Eagon Industrial Co on October 23, 2024 and sell it today you would earn a total of  87,654  from holding Eagon Industrial Co or generate 17.8% return on investment over 90 days.

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

Solution Advanced Technology  vs.  Eagon Industrial Co

Solution Advanced

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solution Advanced Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Eagon Industrial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Eagon Industrial Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Eagon Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Solution Advanced and Eagon Industrial

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

The idea behind Solution Advanced Technology and Eagon Industrial 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 Stocks Directory module to find actively traded stocks across global markets.