Correlation Between CKM Building and Solar Applied

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

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

Diversification Opportunities for CKM Building and Solar Applied

0.48

Correlation Coefficient

CKM Building  Solar Applied

Very weak diversification

The 3 months correlation between CKM and Solar is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding CKM Building Material 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 CKM Building 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 CKM Building Material 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 CKM Building i.e., CKM Building and Solar Applied go up and down completely randomly.

Pair Corralation between CKM Building and Solar Applied

Assuming the 90 days trading horizon CKM Building is expected to generate 1.37 times less return on investment than Solar Applied. But when comparing it to its historical volatility, CKM Building Material is 1.99 times less risky than Solar Applied. It trades about 0.27 of its potential returns per unit of risk. Solar Applied Materials is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  6,130  in Solar Applied Materials on September 16, 2024 and sell it today you would earn a total of  640.00  from holding Solar Applied Materials or generate 10.44% return on investment over 90 days.

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

CKM Building Material  vs.  Solar Applied Materials

CKM Building Material

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CKM Building Material are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, CKM Building is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Solar Applied Materials

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Solar Applied Materials are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Solar Applied is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with CKM Building and Solar Applied

The main advantage of trading using opposite CKM Building and Solar Applied positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CKM Building 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 CKM Building Material 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.