Correlation Between Solaris Oilfield and North American

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

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

Diversification Opportunities for Solaris Oilfield and North American

0.11

Correlation Coefficient

Solaris Oilfield  North American

Average diversification

The 3 months correlation between Solaris and North is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Solaris Oilfield Infrastructur and North American Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Const and Solaris Oilfield 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 Oilfield Infrastructure are associated (or correlated) with North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Const has no effect on the direction of Solaris Oilfield i.e., Solaris Oilfield and North American go up and down completely randomly.

Pair Corralation between Solaris Oilfield and North American

Considering the 90-day investment horizon Solaris Oilfield is expected to generate 1.18 times less return on investment than North American. In addition to that, Solaris Oilfield is 1.33 times more volatile than North American Construction. It trades about 0.03 of its total potential returns per unit of risk. North American Construction is currently generating about 0.05 per unit of volatility. If you would invest  1,268  in North American Construction on September 19, 2024 and sell it today you would earn a total of  767.00  from holding North American Construction or generate 60.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	86.49%
Values	Daily Returns

Solaris Oilfield Infrastructur  vs.  North American Construction

Solaris Oilfield Inf

Risk-Adjusted Performance

0 of 100

Very Weak

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

North American Const

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in North American Construction are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, North American may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Solaris Oilfield and North American

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

The idea behind Solaris Oilfield Infrastructure and North American Construction 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.