Correlation Between Collins Foods and SolarEdge Technologies

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

By analyzing existing cross correlation between Collins Foods Limited and SolarEdge Technologies, you can compare the effects of market volatilities on Collins Foods and SolarEdge Technologies 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 Collins Foods with a short position of SolarEdge Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Collins Foods and SolarEdge Technologies.

Diversification Opportunities for Collins Foods and SolarEdge Technologies

0.15

Correlation Coefficient

Collins Foods  SolarEdge Technologies

Average diversification

The 3 months correlation between Collins and SolarEdge is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Collins Foods Limited and SolarEdge Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SolarEdge Technologies and Collins Foods 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 Collins Foods Limited are associated (or correlated) with SolarEdge Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SolarEdge Technologies has no effect on the direction of Collins Foods i.e., Collins Foods and SolarEdge Technologies go up and down completely randomly.

Pair Corralation between Collins Foods and SolarEdge Technologies

Assuming the 90 days horizon Collins Foods Limited is expected to generate 0.35 times more return on investment than SolarEdge Technologies. However, Collins Foods Limited is 2.88 times less risky than SolarEdge Technologies. It trades about -0.06 of its potential returns per unit of risk. SolarEdge Technologies is currently generating about -0.04 per unit of risk. If you would invest  533.00  in Collins Foods Limited on October 7, 2024 and sell it today you would lose (91.00) from holding Collins Foods Limited or give up 17.07% of portfolio value over 90 days.

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

Collins Foods Limited  vs.  SolarEdge Technologies

Collins Foods Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Collins Foods Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

SolarEdge Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SolarEdge Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Collins Foods and SolarEdge Technologies

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

The idea behind Collins Foods Limited and SolarEdge Technologies 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.

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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.