Correlation Between Solaris Resources and SolGold PLC

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

By analyzing existing cross correlation between Solaris Resources and SolGold PLC, you can compare the effects of market volatilities on Solaris Resources and SolGold PLC 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 Solaris Resources with a short position of SolGold PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solaris Resources and SolGold PLC.

Diversification Opportunities for Solaris Resources and SolGold PLC

0.3

Correlation Coefficient

Solaris Resources  SolGold PLC

Weak diversification

The 3 months correlation between Solaris and SolGold is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Solaris Resources and SolGold PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SolGold PLC and Solaris Resources 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 Solaris Resources are associated (or correlated) with SolGold PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SolGold PLC has no effect on the direction of Solaris Resources i.e., Solaris Resources and SolGold PLC go up and down completely randomly.

Pair Corralation between Solaris Resources and SolGold PLC

Assuming the 90 days trading horizon Solaris Resources is expected to generate 1.03 times less return on investment than SolGold PLC. But when comparing it to its historical volatility, Solaris Resources is 1.32 times less risky than SolGold PLC. It trades about 0.06 of its potential returns per unit of risk. SolGold PLC is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  13.00  in SolGold PLC on December 30, 2024 and sell it today you would earn a total of  1.00  from holding SolGold PLC or generate 7.69% return on investment over 90 days.

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

Solaris Resources  vs.  SolGold PLC

Solaris Resources

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Solaris Resources are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Solaris Resources may actually be approaching a critical reversion point that can send shares even higher in April 2025.

SolGold PLC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SolGold PLC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, SolGold PLC may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Solaris Resources and SolGold PLC

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

The idea behind Solaris Resources and SolGold PLC 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.