Correlation Between Serstech and SolTech Energy

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

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

Diversification Opportunities for Serstech and SolTech Energy

-0.66

Correlation Coefficient

Serstech  SolTech Energy

Excellent diversification

The 3 months correlation between Serstech and SolTech is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Serstech AB and SolTech Energy Sweden in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SolTech Energy Sweden and Serstech 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 Serstech AB are associated (or correlated) with SolTech Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SolTech Energy Sweden has no effect on the direction of Serstech i.e., Serstech and SolTech Energy go up and down completely randomly.

Pair Corralation between Serstech and SolTech Energy

Assuming the 90 days trading horizon Serstech AB is expected to generate 1.01 times more return on investment than SolTech Energy. However, Serstech is 1.01 times more volatile than SolTech Energy Sweden. It trades about 0.11 of its potential returns per unit of risk. SolTech Energy Sweden is currently generating about -0.16 per unit of risk. If you would invest  92.00  in Serstech AB on October 23, 2024 and sell it today you would earn a total of  25.00  from holding Serstech AB or generate 27.17% return on investment over 90 days.

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

Serstech AB  vs.  SolTech Energy Sweden

Serstech AB

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Serstech AB are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Serstech unveiled solid returns over the last few months and may actually be approaching a breakup point.

SolTech Energy Sweden

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SolTech Energy Sweden has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Serstech and SolTech Energy

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

The idea behind Serstech AB and SolTech Energy 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.

Check out your portfolio center.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.