Correlation Between Solution Advanced and Keyang Electric

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

Diversification Opportunities for Solution Advanced and Keyang Electric

-0.24

Correlation Coefficient

Solution Advanced  Keyang Electric

Very good diversification

The 3 months correlation between Solution and Keyang is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Solution Advanced Technology and Keyang Electric Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keyang Electric Machinery 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 Keyang Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keyang Electric Machinery has no effect on the direction of Solution Advanced i.e., Solution Advanced and Keyang Electric go up and down completely randomly.

Pair Corralation between Solution Advanced and Keyang Electric

Assuming the 90 days trading horizon Solution Advanced Technology is expected to generate 3.95 times more return on investment than Keyang Electric. However, Solution Advanced is 3.95 times more volatile than Keyang Electric Machinery. It trades about 0.18 of its potential returns per unit of risk. Keyang Electric Machinery is currently generating about -0.07 per unit of risk. If you would invest  131,200  in Solution Advanced Technology on December 30, 2024 and sell it today you would earn a total of  110,800  from holding Solution Advanced Technology or generate 84.45% return on investment over 90 days.

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

Solution Advanced Technology  vs.  Keyang Electric Machinery

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 14 (%) 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.

Keyang Electric Machinery

Risk-Adjusted Performance

Very Weak

Over the last 90 days Keyang Electric Machinery 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.

Pair Trading with Solution Advanced and Keyang Electric

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

The idea behind Solution Advanced Technology and Keyang Electric Machinery 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.