Correlation Between GreenPower and Solar Alliance

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Can any of the company-specific risk be diversified away by investing in both GreenPower and Solar Alliance 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 GreenPower and Solar Alliance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GreenPower Motor and Solar Alliance Energy, you can compare the effects of market volatilities on GreenPower and Solar Alliance 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 GreenPower with a short position of Solar Alliance. Check out your portfolio center. Please also check ongoing floating volatility patterns of GreenPower and Solar Alliance.

Diversification Opportunities for GreenPower and Solar Alliance

0.47
  Correlation Coefficient

Very weak diversification

The 3 months correlation between GreenPower and Solar is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding GreenPower Motor and Solar Alliance Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solar Alliance Energy and GreenPower 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 GreenPower Motor are associated (or correlated) with Solar Alliance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solar Alliance Energy has no effect on the direction of GreenPower i.e., GreenPower and Solar Alliance go up and down completely randomly.

Pair Corralation between GreenPower and Solar Alliance

Assuming the 90 days horizon GreenPower is expected to generate 1.59 times less return on investment than Solar Alliance. But when comparing it to its historical volatility, GreenPower Motor is 2.04 times less risky than Solar Alliance. It trades about 0.02 of its potential returns per unit of risk. Solar Alliance Energy is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  5.00  in Solar Alliance Energy on September 10, 2024 and sell it today you would lose (2.00) from holding Solar Alliance Energy or give up 40.0% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

GreenPower Motor  vs.  Solar Alliance Energy

 Performance 
       Timeline  
GreenPower Motor 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in GreenPower Motor are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, GreenPower may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Solar Alliance Energy 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Solar Alliance Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal essential indicators, Solar Alliance showed solid returns over the last few months and may actually be approaching a breakup point.

GreenPower and Solar Alliance Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GreenPower and Solar Alliance

The main advantage of trading using opposite GreenPower and Solar Alliance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GreenPower position performs unexpectedly, Solar Alliance 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 Alliance will offset losses from the drop in Solar Alliance's long position.
The idea behind GreenPower Motor and Solar Alliance Energy 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.
Check out your portfolio center.
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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