Correlation Between Solar Alliance and CDSPI Petite

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

By analyzing existing cross correlation between Solar Alliance Energy and CDSPI petite cap, you can compare the effects of market volatilities on Solar Alliance and CDSPI Petite 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 Alliance with a short position of CDSPI Petite. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solar Alliance and CDSPI Petite.

Diversification Opportunities for Solar Alliance and CDSPI Petite

-0.53

Correlation Coefficient

Solar Alliance  CDSPI Petite

Excellent diversification

The 3 months correlation between Solar and CDSPI is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Solar Alliance Energy and CDSPI petite cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CDSPI petite cap and Solar Alliance 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 Alliance Energy are associated (or correlated) with CDSPI Petite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CDSPI petite cap has no effect on the direction of Solar Alliance i.e., Solar Alliance and CDSPI Petite go up and down completely randomly.

Pair Corralation between Solar Alliance and CDSPI Petite

Assuming the 90 days trading horizon Solar Alliance Energy is expected to under-perform the CDSPI Petite. In addition to that, Solar Alliance is 3.82 times more volatile than CDSPI petite cap. It trades about -0.22 of its total potential returns per unit of risk. CDSPI petite cap is currently generating about -0.19 per unit of volatility. If you would invest  7,384  in CDSPI petite cap on October 11, 2024 and sell it today you would lose (273.00) from holding CDSPI petite cap or give up 3.7% of portfolio value over 90 days.

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

Solar Alliance Energy  vs.  CDSPI petite cap

Solar Alliance Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solar Alliance Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable essential indicators, Solar Alliance is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

CDSPI petite cap

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CDSPI petite cap are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak basic indicators, CDSPI Petite may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Solar Alliance and CDSPI Petite

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

The idea behind Solar Alliance Energy and CDSPI petite cap 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 Global Correlations module to find global opportunities by holding instruments from different markets.