Correlation Between IONQ and Principal Solar

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

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

Diversification Opportunities for IONQ and Principal Solar

-0.8

Correlation Coefficient

IONQ  Principal Solar

Pay attention - limited upside

The 3 months correlation between IONQ and Principal is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding IONQ Inc and Principal Solar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Principal Solar and IONQ 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 IONQ Inc are associated (or correlated) with Principal Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Principal Solar has no effect on the direction of IONQ i.e., IONQ and Principal Solar go up and down completely randomly.

Pair Corralation between IONQ and Principal Solar

Given the investment horizon of 90 days IONQ is expected to generate 16.71 times less return on investment than Principal Solar. But when comparing it to its historical volatility, IONQ Inc is 3.21 times less risky than Principal Solar. It trades about 0.05 of its potential returns per unit of risk. Principal Solar is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  0.01  in Principal Solar on October 22, 2024 and sell it today you would earn a total of  0.01  from holding Principal Solar or generate 100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	94.74%
Values	Daily Returns

IONQ Inc  vs.  Principal Solar

IONQ Inc

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IONQ Inc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, IONQ reported solid returns over the last few months and may actually be approaching a breakup point.

Principal Solar

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Principal Solar are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Principal Solar showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IONQ and Principal Solar

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

The idea behind IONQ Inc and Principal Solar 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.