Correlation Between Exel Composites and Solteq PLC

Can any of the company-specific risk be diversified away by investing in both Exel Composites and Solteq PLC 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 Exel Composites and Solteq PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Exel Composites Oyj and Solteq PLC, you can compare the effects of market volatilities on Exel Composites and Solteq PLC 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 Exel Composites with a short position of Solteq PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exel Composites and Solteq PLC.

Diversification Opportunities for Exel Composites and Solteq PLC

0.45

Correlation Coefficient

Exel Composites  Solteq PLC

Very weak diversification

The 3 months correlation between Exel and Solteq is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Exel Composites Oyj and Solteq PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solteq PLC and Exel Composites 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 Exel Composites Oyj are associated (or correlated) with Solteq PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solteq PLC has no effect on the direction of Exel Composites i.e., Exel Composites and Solteq PLC go up and down completely randomly.

Pair Corralation between Exel Composites and Solteq PLC

Assuming the 90 days trading horizon Exel Composites Oyj is expected to generate 0.91 times more return on investment than Solteq PLC. However, Exel Composites Oyj is 1.1 times less risky than Solteq PLC. It trades about 0.21 of its potential returns per unit of risk. Solteq PLC is currently generating about 0.1 per unit of risk. If you would invest  28.00  in Exel Composites Oyj on December 30, 2024 and sell it today you would earn a total of  12.00  from holding Exel Composites Oyj or generate 42.86% return on investment over 90 days.

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

Exel Composites Oyj  vs.  Solteq PLC

Exel Composites Oyj

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Exel Composites Oyj are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent technical indicators, Exel Composites demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Solteq PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Solteq PLC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent essential indicators, Solteq PLC sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Exel Composites and Solteq PLC

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

The idea behind Exel Composites Oyj and Solteq PLC 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.