Correlation Between Paragon Technologies and Solitron Devices

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

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

Diversification Opportunities for Paragon Technologies and Solitron Devices

-0.22

Correlation Coefficient

Paragon Technologies  Solitron Devices

Very good diversification

The 3 months correlation between Paragon and Solitron is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Paragon Technologies and Solitron Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solitron Devices and Paragon Technologies 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 Paragon Technologies are associated (or correlated) with Solitron Devices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solitron Devices has no effect on the direction of Paragon Technologies i.e., Paragon Technologies and Solitron Devices go up and down completely randomly.

Pair Corralation between Paragon Technologies and Solitron Devices

Given the investment horizon of 90 days Paragon Technologies is expected to generate 1.9 times more return on investment than Solitron Devices. However, Paragon Technologies is 1.9 times more volatile than Solitron Devices. It trades about 0.02 of its potential returns per unit of risk. Solitron Devices is currently generating about 0.02 per unit of risk. If you would invest  997.00  in Paragon Technologies on December 27, 2024 and sell it today you would lose (12.00) from holding Paragon Technologies or give up 1.2% of portfolio value over 90 days.

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

Paragon Technologies  vs.  Solitron Devices

Paragon Technologies

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Paragon Technologies are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Paragon Technologies may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Solitron Devices

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Solitron Devices are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, Solitron Devices is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Paragon Technologies and Solitron Devices

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

The idea behind Paragon Technologies and Solitron Devices 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.