Correlation Between Flinders Resources and Solaris Resources

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

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

Diversification Opportunities for Flinders Resources and Solaris Resources

0.5

Correlation Coefficient

Flinders Resources  Solaris Resources

Very weak diversification

The 3 months correlation between Flinders and Solaris is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Flinders Resources Limited and Solaris Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solaris Resources and Flinders Resources 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 Flinders Resources Limited are associated (or correlated) with Solaris Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solaris Resources has no effect on the direction of Flinders Resources i.e., Flinders Resources and Solaris Resources go up and down completely randomly.

Pair Corralation between Flinders Resources and Solaris Resources

Assuming the 90 days horizon Flinders Resources is expected to generate 1.24 times less return on investment than Solaris Resources. In addition to that, Flinders Resources is 1.22 times more volatile than Solaris Resources. It trades about 0.18 of its total potential returns per unit of risk. Solaris Resources is currently generating about 0.28 per unit of volatility. If you would invest  453.00  in Solaris Resources on October 23, 2024 and sell it today you would earn a total of  74.00  from holding Solaris Resources or generate 16.34% return on investment over 90 days.

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

Flinders Resources Limited  vs.  Solaris Resources

Flinders Resources

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Flinders Resources Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Flinders Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Solaris Resources

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Solaris Resources are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Solaris Resources displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Flinders Resources and Solaris Resources

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

The idea behind Flinders Resources Limited and Solaris Resources 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.