Correlation Between Butterfly Network and Solar Integrated

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

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

Diversification Opportunities for Butterfly Network and Solar Integrated

-0.28

Correlation Coefficient

Butterfly Network  Solar Integrated

Very good diversification

The 3 months correlation between Butterfly and Solar is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Butterfly Network and Solar Integrated Roofing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solar Integrated Roofing and Butterfly Network 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 Butterfly Network are associated (or correlated) with Solar Integrated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solar Integrated Roofing has no effect on the direction of Butterfly Network i.e., Butterfly Network and Solar Integrated go up and down completely randomly.

Pair Corralation between Butterfly Network and Solar Integrated

Given the investment horizon of 90 days Butterfly Network is expected to generate 2.44 times less return on investment than Solar Integrated. But when comparing it to its historical volatility, Butterfly Network is 4.14 times less risky than Solar Integrated. It trades about 0.05 of its potential returns per unit of risk. Solar Integrated Roofing is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,111  in Solar Integrated Roofing on October 7, 2024 and sell it today you would lose (1,111) from holding Solar Integrated Roofing or give up 100.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Butterfly Network  vs.  Solar Integrated Roofing

Butterfly Network

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Butterfly Network are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Butterfly Network showed solid returns over the last few months and may actually be approaching a breakup point.

Solar Integrated Roofing

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Solar Integrated Roofing are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Solar Integrated exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Butterfly Network and Solar Integrated

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

The idea behind Butterfly Network and Solar Integrated Roofing 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.