Correlation Between Solar Alliance and Aurora Solar

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

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

Diversification Opportunities for Solar Alliance and Aurora Solar

0.77

Correlation Coefficient

Solar Alliance  Aurora Solar

Poor diversification

The 3 months correlation between Solar and Aurora is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Solar Alliance Energy and Aurora Solar Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurora Solar Technologies and Solar Alliance 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 Solar Alliance Energy are associated (or correlated) with Aurora Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurora Solar Technologies has no effect on the direction of Solar Alliance i.e., Solar Alliance and Aurora Solar go up and down completely randomly.

Pair Corralation between Solar Alliance and Aurora Solar

Assuming the 90 days horizon Solar Alliance is expected to generate 2.96 times less return on investment than Aurora Solar. But when comparing it to its historical volatility, Solar Alliance Energy is 1.3 times less risky than Aurora Solar. It trades about 0.02 of its potential returns per unit of risk. Aurora Solar Technologies is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1.90  in Aurora Solar Technologies on September 17, 2024 and sell it today you would lose (0.10) from holding Aurora Solar Technologies or give up 5.26% of portfolio value over 90 days.

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

Solar Alliance Energy  vs.  Aurora Solar Technologies

Solar Alliance Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solar Alliance Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Aurora Solar Technologies

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aurora Solar Technologies are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Aurora Solar reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Solar Alliance and Aurora Solar

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

The idea behind Solar Alliance Energy and Aurora Solar Technologies 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.