Correlation Between Great Computer and Solar Applied

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

By analyzing existing cross correlation between Great Computer and Solar Applied Materials, you can compare the effects of market volatilities on Great Computer and Solar Applied 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 Great Computer with a short position of Solar Applied. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Computer and Solar Applied.

Diversification Opportunities for Great Computer and Solar Applied

-0.32

Correlation Coefficient

Great Computer  Solar Applied

Very good diversification

The 3 months correlation between Great and Solar is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Great Computer and Solar Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solar Applied Materials and Great Computer 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 Great Computer are associated (or correlated) with Solar Applied. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solar Applied Materials has no effect on the direction of Great Computer i.e., Great Computer and Solar Applied go up and down completely randomly.

Pair Corralation between Great Computer and Solar Applied

Assuming the 90 days trading horizon Great Computer is expected to generate 2.17 times more return on investment than Solar Applied. However, Great Computer is 2.17 times more volatile than Solar Applied Materials. It trades about 0.08 of its potential returns per unit of risk. Solar Applied Materials is currently generating about -0.05 per unit of risk. If you would invest  1,550  in Great Computer on October 20, 2024 and sell it today you would earn a total of  305.00  from holding Great Computer or generate 19.68% return on investment over 90 days.

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

Great Computer  vs.  Solar Applied Materials

Great Computer

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Great Computer are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Great Computer showed solid returns over the last few months and may actually be approaching a breakup point.

Solar Applied Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solar Applied Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Great Computer and Solar Applied

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

The idea behind Great Computer and Solar Applied 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.

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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.