Correlation Between Solution Financial and BOC Aviation

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

By analyzing existing cross correlation between Solution Financial and BOC Aviation Limited, you can compare the effects of market volatilities on Solution Financial and BOC Aviation 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 Solution Financial with a short position of BOC Aviation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solution Financial and BOC Aviation.

Diversification Opportunities for Solution Financial and BOC Aviation

-0.04

Correlation Coefficient

Solution Financial  BOC Aviation

Good diversification

The 3 months correlation between Solution and BOC is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Solution Financial and BOC Aviation Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BOC Aviation Limited and Solution Financial 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 Solution Financial are associated (or correlated) with BOC Aviation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BOC Aviation Limited has no effect on the direction of Solution Financial i.e., Solution Financial and BOC Aviation go up and down completely randomly.

Pair Corralation between Solution Financial and BOC Aviation

Assuming the 90 days horizon Solution Financial is expected to generate 1.63 times more return on investment than BOC Aviation. However, Solution Financial is 1.63 times more volatile than BOC Aviation Limited. It trades about 0.01 of its potential returns per unit of risk. BOC Aviation Limited is currently generating about -0.04 per unit of risk. If you would invest  20.00  in Solution Financial on December 29, 2024 and sell it today you would earn a total of  0.00  from holding Solution Financial or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Solution Financial  vs.  BOC Aviation Limited

Solution Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Solution Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Solution Financial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

BOC Aviation Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days BOC Aviation Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, BOC Aviation is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Solution Financial and BOC Aviation

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

The idea behind Solution Financial and BOC Aviation Limited 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.