Correlation Between Emeco Holdings and Solution Financial

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

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

Diversification Opportunities for Emeco Holdings and Solution Financial

0.17

Correlation Coefficient

Emeco Holdings  Solution Financial

Average diversification

The 3 months correlation between Emeco and Solution is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Emeco Holdings Limited and Solution Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solution Financial and Emeco Holdings 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 Emeco Holdings Limited are associated (or correlated) with Solution Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solution Financial has no effect on the direction of Emeco Holdings i.e., Emeco Holdings and Solution Financial go up and down completely randomly.

Pair Corralation between Emeco Holdings and Solution Financial

Assuming the 90 days horizon Emeco Holdings Limited is expected to generate 0.41 times more return on investment than Solution Financial. However, Emeco Holdings Limited is 2.41 times less risky than Solution Financial. It trades about 0.13 of its potential returns per unit of risk. Solution Financial is currently generating about 0.01 per unit of risk. If you would invest  49.00  in Emeco Holdings Limited on December 29, 2024 and sell it today you would earn a total of  4.00  from holding Emeco Holdings Limited or generate 8.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

Emeco Holdings Limited  vs.  Solution Financial

Emeco Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Emeco Holdings Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Emeco Holdings may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Solution Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Solution Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Solution Financial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Emeco Holdings and Solution Financial

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

The idea behind Emeco Holdings Limited and Solution Financial 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.