Correlation Between Syntec Optics and Aker Solutions

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

By analyzing existing cross correlation between Syntec Optics Holdings and Aker Solutions ASA, you can compare the effects of market volatilities on Syntec Optics and Aker Solutions 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 Syntec Optics with a short position of Aker Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Syntec Optics and Aker Solutions.

Diversification Opportunities for Syntec Optics and Aker Solutions

0.78

Correlation Coefficient

Syntec Optics  Aker Solutions

Poor diversification

The 3 months correlation between Syntec and Aker is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Syntec Optics Holdings and Aker Solutions ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aker Solutions ASA and Syntec Optics 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 Syntec Optics Holdings are associated (or correlated) with Aker Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aker Solutions ASA has no effect on the direction of Syntec Optics i.e., Syntec Optics and Aker Solutions go up and down completely randomly.

Pair Corralation between Syntec Optics and Aker Solutions

Given the investment horizon of 90 days Syntec Optics Holdings is expected to generate 1.74 times more return on investment than Aker Solutions. However, Syntec Optics is 1.74 times more volatile than Aker Solutions ASA. It trades about 0.32 of its potential returns per unit of risk. Aker Solutions ASA is currently generating about 0.23 per unit of risk. If you would invest  88.00  in Syntec Optics Holdings on September 23, 2024 and sell it today you would earn a total of  262.00  from holding Syntec Optics Holdings or generate 297.73% return on investment over 90 days.

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

Syntec Optics Holdings  vs.  Aker Solutions ASA

Syntec Optics Holdings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Syntec Optics Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Syntec Optics showed solid returns over the last few months and may actually be approaching a breakup point.

Aker Solutions ASA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aker Solutions ASA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Aker Solutions showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Syntec Optics and Aker Solutions

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

The idea behind Syntec Optics Holdings and Aker Solutions ASA 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.