Correlation Between Solitron Devices and Surge Components

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

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

Diversification Opportunities for Solitron Devices and Surge Components

0.17

Correlation Coefficient

Solitron Devices  Surge Components

Average diversification

The 3 months correlation between Solitron and Surge is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Solitron Devices and Surge Components in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Surge Components 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 Surge Components. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Surge Components has no effect on the direction of Solitron Devices i.e., Solitron Devices and Surge Components go up and down completely randomly.

Pair Corralation between Solitron Devices and Surge Components

Given the investment horizon of 90 days Solitron Devices is expected to generate 1.04 times more return on investment than Surge Components. However, Solitron Devices is 1.04 times more volatile than Surge Components. It trades about 0.01 of its potential returns per unit of risk. Surge Components is currently generating about -0.06 per unit of risk. If you would invest  1,570  in Solitron Devices on October 6, 2024 and sell it today you would earn a total of  0.00  from holding Solitron Devices or generate 0.0% return on investment over 90 days.

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

Solitron Devices  vs.  Surge Components

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 latest weak performance, the Stock's fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Surge Components

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Surge Components has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Surge Components is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Solitron Devices and Surge Components

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

The idea behind Solitron Devices and Surge Components 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.