Correlation Between Scatec Solar and Powercell Sweden

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

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

Diversification Opportunities for Scatec Solar and Powercell Sweden

0.53

Correlation Coefficient

Scatec Solar  Powercell Sweden

Very weak diversification

The 3 months correlation between Scatec and Powercell is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Scatec Solar OL and Powercell Sweden in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Powercell Sweden and Scatec Solar 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 Scatec Solar OL are associated (or correlated) with Powercell Sweden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Powercell Sweden has no effect on the direction of Scatec Solar i.e., Scatec Solar and Powercell Sweden go up and down completely randomly.

Pair Corralation between Scatec Solar and Powercell Sweden

Assuming the 90 days trading horizon Scatec Solar OL is expected to generate 0.44 times more return on investment than Powercell Sweden. However, Scatec Solar OL is 2.26 times less risky than Powercell Sweden. It trades about 0.02 of its potential returns per unit of risk. Powercell Sweden is currently generating about -0.04 per unit of risk. If you would invest  8,060  in Scatec Solar OL on November 29, 2024 and sell it today you would earn a total of  95.00  from holding Scatec Solar OL or generate 1.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.31%
Values	Daily Returns

Scatec Solar OL  vs.  Powercell Sweden

Scatec Solar OL

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Scatec Solar OL are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Scatec Solar is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Powercell Sweden

Risk-Adjusted Performance

Very Weak

Over the last 90 days Powercell Sweden has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Scatec Solar and Powercell Sweden

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

The idea behind Scatec Solar OL and Powercell Sweden 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.