Correlation Between Solar Alliance and Atco

Can any of the company-specific risk be diversified away by investing in both Solar Alliance and Atco 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 Atco 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 Atco, you can compare the effects of market volatilities on Solar Alliance and Atco 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 Atco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solar Alliance and Atco.

Diversification Opportunities for Solar Alliance and Atco

-0.61

Correlation Coefficient

Solar Alliance  Atco

Excellent diversification

The 3 months correlation between Solar and Atco is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Solar Alliance Energy and Atco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atco 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 Atco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atco has no effect on the direction of Solar Alliance i.e., Solar Alliance and Atco go up and down completely randomly.

Pair Corralation between Solar Alliance and Atco

Assuming the 90 days horizon Solar Alliance Energy is expected to generate 10.71 times more return on investment than Atco. However, Solar Alliance is 10.71 times more volatile than Atco. It trades about 0.01 of its potential returns per unit of risk. Atco is currently generating about 0.07 per unit of risk. If you would invest  2.06  in Solar Alliance Energy on December 25, 2024 and sell it today you would lose (0.59) from holding Solar Alliance Energy or give up 28.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.72%
Values	Daily Returns

Solar Alliance Energy  vs.  Atco

Solar Alliance Energy

Risk-Adjusted Performance

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 nearly fragile basic indicators, Solar Alliance may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Atco

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Atco are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, Atco is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Solar Alliance and Atco

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

The idea behind Solar Alliance Energy and Atco 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.