Correlation Between Solution Financial and FlexShopper

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

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

Diversification Opportunities for Solution Financial and FlexShopper

0.22

Correlation Coefficient

Solution Financial  FlexShopper

Modest diversification

The 3 months correlation between Solution and FlexShopper is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Solution Financial and FlexShopper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShopper 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 FlexShopper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShopper has no effect on the direction of Solution Financial i.e., Solution Financial and FlexShopper go up and down completely randomly.

Pair Corralation between Solution Financial and FlexShopper

Assuming the 90 days horizon Solution Financial is expected to generate 0.41 times more return on investment than FlexShopper. However, Solution Financial is 2.43 times less risky than FlexShopper. It trades about 0.01 of its potential returns per unit of risk. FlexShopper is currently generating about -0.06 per unit of risk. If you would invest  20.00  in Solution Financial on December 1, 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 Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Solution Financial  vs.  FlexShopper

Solution Financial

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Solution Financial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Solution Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

FlexShopper

Risk-Adjusted Performance

Very Weak

Over the last 90 days FlexShopper has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Solution Financial and FlexShopper

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

The idea behind Solution Financial and FlexShopper 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.