Correlation Between Solution Advanced and Solus Advanced

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

Diversification Opportunities for Solution Advanced and Solus Advanced

0.4

Correlation Coefficient

Solution Advanced  Solus Advanced

Very weak diversification

The 3 months correlation between Solution and Solus is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Solution Advanced Technology and Solus Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solus Advanced Materials 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 Solus Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solus Advanced Materials has no effect on the direction of Solution Advanced i.e., Solution Advanced and Solus Advanced go up and down completely randomly.

Pair Corralation between Solution Advanced and Solus Advanced

Assuming the 90 days trading horizon Solution Advanced Technology is expected to generate 1.61 times more return on investment than Solus Advanced. However, Solution Advanced is 1.61 times more volatile than Solus Advanced Materials. It trades about 0.14 of its potential returns per unit of risk. Solus Advanced Materials is currently generating about 0.05 per unit of risk. If you would invest  144,800  in Solution Advanced Technology on December 4, 2024 and sell it today you would earn a total of  80,200  from holding Solution Advanced Technology or generate 55.39% 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.  Solus Advanced Materials

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 11 (%) 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.

Solus Advanced Materials

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Solus Advanced Materials are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Solus Advanced sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Solution Advanced and Solus Advanced

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

The idea behind Solution Advanced Technology and Solus Advanced Materials 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.