Correlation Between Solitron Devices and Paragon Technologies

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

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

Diversification Opportunities for Solitron Devices and Paragon Technologies

-0.44

Correlation Coefficient

Solitron Devices  Paragon Technologies

Very good diversification

The 3 months correlation between Solitron and Paragon is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Solitron Devices and Paragon Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paragon Technologies and Solitron Devices 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 Solitron Devices are associated (or correlated) with Paragon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paragon Technologies has no effect on the direction of Solitron Devices i.e., Solitron Devices and Paragon Technologies go up and down completely randomly.

Pair Corralation between Solitron Devices and Paragon Technologies

Given the investment horizon of 90 days Solitron Devices is expected to generate 1.99 times less return on investment than Paragon Technologies. But when comparing it to its historical volatility, Solitron Devices is 3.12 times less risky than Paragon Technologies. It trades about 0.15 of its potential returns per unit of risk. Paragon Technologies is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  900.00  in Paragon Technologies on October 21, 2024 and sell it today you would earn a total of  75.00  from holding Paragon Technologies or generate 8.33% return on investment over 90 days.

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

Solitron Devices  vs.  Paragon Technologies

Solitron Devices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solitron Devices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Solitron Devices is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Paragon Technologies

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Paragon Technologies are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Paragon Technologies unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Solitron Devices and Paragon Technologies

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

The idea behind Solitron Devices and Paragon Technologies 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.