Correlation Between Solution Advanced and Sempio Foods

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

Diversification Opportunities for Solution Advanced and Sempio Foods

0.59

Correlation Coefficient

Solution Advanced  Sempio Foods

Very weak diversification

The 3 months correlation between Solution and Sempio is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Solution Advanced Technology and Sempio Foods Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sempio Foods 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 Sempio Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sempio Foods has no effect on the direction of Solution Advanced i.e., Solution Advanced and Sempio Foods go up and down completely randomly.

Pair Corralation between Solution Advanced and Sempio Foods

Assuming the 90 days trading horizon Solution Advanced Technology is expected to generate 2.9 times more return on investment than Sempio Foods. However, Solution Advanced is 2.9 times more volatile than Sempio Foods Co. It trades about 0.13 of its potential returns per unit of risk. Sempio Foods Co is currently generating about 0.03 per unit of risk. If you would invest  148,500  in Solution Advanced Technology on December 3, 2024 and sell it today you would earn a total of  76,500  from holding Solution Advanced Technology or generate 51.52% return on investment over 90 days.

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

Solution Advanced Technology  vs.  Sempio Foods Co

Solution Advanced

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Solution Advanced Technology are ranked lower than 10 (%) 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.

Sempio Foods

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sempio Foods Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Sempio Foods 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 Sempio Foods

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

The idea behind Solution Advanced Technology and Sempio Foods 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.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.