Correlation Between Freightcar America and Solarmax Technology

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

By analyzing existing cross correlation between Freightcar America and Solarmax Technology Common, you can compare the effects of market volatilities on Freightcar America and Solarmax Technology 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 Freightcar America with a short position of Solarmax Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freightcar America and Solarmax Technology.

Diversification Opportunities for Freightcar America and Solarmax Technology

-0.5

Correlation Coefficient

Freightcar America  Solarmax Technology

Very good diversification

The 3 months correlation between Freightcar and Solarmax is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Freightcar America and Solarmax Technology Common in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solarmax Technology and Freightcar America 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 Freightcar America are associated (or correlated) with Solarmax Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solarmax Technology has no effect on the direction of Freightcar America i.e., Freightcar America and Solarmax Technology go up and down completely randomly.

Pair Corralation between Freightcar America and Solarmax Technology

Given the investment horizon of 90 days Freightcar America is expected to generate 40.39 times less return on investment than Solarmax Technology. But when comparing it to its historical volatility, Freightcar America is 1.41 times less risky than Solarmax Technology. It trades about 0.01 of its potential returns per unit of risk. Solarmax Technology Common is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  95.00  in Solarmax Technology Common on October 26, 2024 and sell it today you would earn a total of  92.00  from holding Solarmax Technology Common or generate 96.84% return on investment over 90 days.

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

Freightcar America  vs.  Solarmax Technology Common

Freightcar America

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Freightcar America has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward indicators, Freightcar America is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Solarmax Technology

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Solarmax Technology Common are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Solarmax Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Freightcar America and Solarmax Technology

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

The idea behind Freightcar America and Solarmax Technology Common 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 CEOs Directory module to screen CEOs from public companies around the world.