Correlation Between Neinor Homes and Energy Solar

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

By analyzing existing cross correlation between Neinor Homes SLU and Energy Solar Tech, you can compare the effects of market volatilities on Neinor Homes and Energy Solar 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 Neinor Homes with a short position of Energy Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Neinor Homes and Energy Solar.

Diversification Opportunities for Neinor Homes and Energy Solar

0.2

Correlation Coefficient

Neinor Homes  Energy Solar

Modest diversification

The 3 months correlation between Neinor and Energy is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Neinor Homes SLU and Energy Solar Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Solar Tech and Neinor Homes 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 Neinor Homes SLU are associated (or correlated) with Energy Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Solar Tech has no effect on the direction of Neinor Homes i.e., Neinor Homes and Energy Solar go up and down completely randomly.

Pair Corralation between Neinor Homes and Energy Solar

Assuming the 90 days trading horizon Neinor Homes SLU is expected to generate 0.79 times more return on investment than Energy Solar. However, Neinor Homes SLU is 1.26 times less risky than Energy Solar. It trades about 0.19 of its potential returns per unit of risk. Energy Solar Tech is currently generating about -0.01 per unit of risk. If you would invest  1,280  in Neinor Homes SLU on September 5, 2024 and sell it today you would earn a total of  232.00  from holding Neinor Homes SLU or generate 18.13% return on investment over 90 days.

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

Neinor Homes SLU  vs.  Energy Solar Tech

Neinor Homes SLU

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Neinor Homes SLU are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Neinor Homes exhibited solid returns over the last few months and may actually be approaching a breakup point.

Energy Solar Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Energy Solar Tech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Energy Solar is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Neinor Homes and Energy Solar

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

The idea behind Neinor Homes SLU and Energy Solar Tech 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.