Correlation Between Solution Advanced and SAMG Entertainment

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

Diversification Opportunities for Solution Advanced and SAMG Entertainment

0.69

Correlation Coefficient

Solution Advanced  SAMG Entertainment

Poor diversification

The 3 months correlation between Solution and SAMG is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Solution Advanced Technology and SAMG Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAMG Entertainment 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 SAMG Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAMG Entertainment has no effect on the direction of Solution Advanced i.e., Solution Advanced and SAMG Entertainment go up and down completely randomly.

Pair Corralation between Solution Advanced and SAMG Entertainment

Assuming the 90 days trading horizon Solution Advanced Technology is expected to under-perform the SAMG Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, Solution Advanced Technology is 1.3 times less risky than SAMG Entertainment. The stock trades about -0.11 of its potential returns per unit of risk. The SAMG Entertainment Co is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  1,483,000  in SAMG Entertainment Co on October 12, 2024 and sell it today you would lose (181,000) from holding SAMG Entertainment Co or give up 12.2% 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.  SAMG Entertainment 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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

SAMG Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SAMG Entertainment Co 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 SAMG Entertainment

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

The idea behind Solution Advanced Technology and SAMG Entertainment 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.