Correlation Between Solar AS and HusCompagniet

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

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

Diversification Opportunities for Solar AS and HusCompagniet

0.73

Correlation Coefficient

Solar AS  HusCompagniet

Poor diversification

The 3 months correlation between Solar and HusCompagniet is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Solar AS and HusCompagniet AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HusCompagniet AS 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 HusCompagniet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HusCompagniet AS has no effect on the direction of Solar AS i.e., Solar AS and HusCompagniet go up and down completely randomly.

Pair Corralation between Solar AS and HusCompagniet

Assuming the 90 days trading horizon Solar AS is expected to under-perform the HusCompagniet. But the stock apears to be less risky and, when comparing its historical volatility, Solar AS is 1.04 times less risky than HusCompagniet. The stock trades about -0.06 of its potential returns per unit of risk. The HusCompagniet AS is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  4,635  in HusCompagniet AS on October 24, 2024 and sell it today you would earn a total of  905.00  from holding HusCompagniet AS or generate 19.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.59%
Values	Daily Returns

Solar AS  vs.  HusCompagniet AS

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.

HusCompagniet AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HusCompagniet AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Solar AS and HusCompagniet

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

The idea behind Solar AS and HusCompagniet AS 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.