Correlation Between Raontech and Solution Advanced

Can any of the company-specific risk be diversified away by investing in both Raontech and Solution 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 Raontech and Solution Advanced into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Raontech and Solution Advanced Technology, you can compare the effects of market volatilities on Raontech and Solution 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 Raontech with a short position of Solution Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Raontech and Solution Advanced.

Diversification Opportunities for Raontech and Solution Advanced

-0.24

Correlation Coefficient

Raontech  Solution Advanced

Very good diversification

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

Pair Corralation between Raontech and Solution Advanced

Assuming the 90 days trading horizon Raontech is expected to under-perform the Solution Advanced. In addition to that, Raontech is 1.12 times more volatile than Solution Advanced Technology. It trades about -0.02 of its total potential returns per unit of risk. Solution Advanced Technology is currently generating about 0.06 per unit of volatility. If you would invest  140,000  in Solution Advanced Technology on October 23, 2024 and sell it today you would earn a total of  3,000  from holding Solution Advanced Technology or generate 2.14% return on investment over 90 days.

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

Raontech  vs.  Solution Advanced Technology

Raontech

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Raontech are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Raontech may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 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 Raontech and Solution Advanced

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

The idea behind Raontech and Solution Advanced Technology 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.