Correlation Between I Tech and SolTech Energy

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

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

Diversification Opportunities for I Tech and SolTech Energy

0.34

Correlation Coefficient

I Tech  SolTech Energy

Weak diversification

The 3 months correlation between ITECH and SolTech is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding I Tech and SolTech Energy Sweden in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SolTech Energy Sweden and I Tech 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 I Tech are associated (or correlated) with SolTech Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SolTech Energy Sweden has no effect on the direction of I Tech i.e., I Tech and SolTech Energy go up and down completely randomly.

Pair Corralation between I Tech and SolTech Energy

Assuming the 90 days trading horizon I Tech is expected to generate 1.9 times less return on investment than SolTech Energy. But when comparing it to its historical volatility, I Tech is 1.83 times less risky than SolTech Energy. It trades about 0.23 of its potential returns per unit of risk. SolTech Energy Sweden is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  217.00  in SolTech Energy Sweden on December 2, 2024 and sell it today you would earn a total of  276.00  from holding SolTech Energy Sweden or generate 127.19% return on investment over 90 days.

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

I Tech  vs.  SolTech Energy Sweden

I Tech

Risk-Adjusted Performance

Solid

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

SolTech Energy Sweden

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SolTech Energy Sweden are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, SolTech Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with I Tech and SolTech Energy

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

The idea behind I Tech and SolTech Energy Sweden 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.