Correlation Between Solution Advanced and Nature

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

Diversification Opportunities for Solution Advanced and Nature

0.74

Correlation Coefficient

Solution Advanced  Nature

Poor diversification

The 3 months correlation between Solution and Nature is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Solution Advanced Technology and Nature and Environment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nature and Environment 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 Nature. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nature and Environment has no effect on the direction of Solution Advanced i.e., Solution Advanced and Nature go up and down completely randomly.

Pair Corralation between Solution Advanced and Nature

Assuming the 90 days trading horizon Solution Advanced Technology is expected to under-perform the Nature. In addition to that, Solution Advanced is 1.01 times more volatile than Nature and Environment. It trades about -0.12 of its total potential returns per unit of risk. Nature and Environment is currently generating about -0.04 per unit of volatility. If you would invest  66,500  in Nature and Environment on September 24, 2024 and sell it today you would lose (6,200) from holding Nature and Environment or give up 9.32% of portfolio value over 90 days.

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

Solution Advanced Technology  vs.  Nature and Environment

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 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.

Nature and Environment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nature and Environment 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 Nature

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

The idea behind Solution Advanced Technology and Nature and Environment 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.