Correlation Between Solar AS and Broedrene

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

By analyzing existing cross correlation between Solar AS and Broedrene AO Johansen, you can compare the effects of market volatilities on Solar AS and Broedrene 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 Solar AS with a short position of Broedrene. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solar AS and Broedrene.

Diversification Opportunities for Solar AS and Broedrene

0.76

Correlation Coefficient

Solar AS  Broedrene

Poor diversification

The 3 months correlation between Solar and Broedrene is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Solar AS and Broedrene AO Johansen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broedrene AO Johansen and Solar AS 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 Solar AS are associated (or correlated) with Broedrene. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broedrene AO Johansen has no effect on the direction of Solar AS i.e., Solar AS and Broedrene go up and down completely randomly.

Pair Corralation between Solar AS and Broedrene

Assuming the 90 days trading horizon Solar AS is expected to generate 1.26 times more return on investment than Broedrene. However, Solar AS is 1.26 times more volatile than Broedrene AO Johansen. It trades about -0.07 of its potential returns per unit of risk. Broedrene AO Johansen is currently generating about -0.14 per unit of risk. If you would invest  32,100  in Solar AS on October 23, 2024 and sell it today you would lose (2,600) from holding Solar AS or give up 8.1% of portfolio value over 90 days.

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

Solar AS  vs.  Broedrene AO Johansen

Solar AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solar AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Broedrene AO Johansen

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Broedrene AO Johansen has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Solar AS and Broedrene

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

The idea behind Solar AS and Broedrene AO Johansen 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.