Correlation Between Solar Alliance and RBC Canadian

Can any of the company-specific risk be diversified away by investing in both Solar Alliance and RBC Canadian 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 RBC Canadian 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 RBC Canadian Equity, you can compare the effects of market volatilities on Solar Alliance and RBC Canadian 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 RBC Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solar Alliance and RBC Canadian.

Diversification Opportunities for Solar Alliance and RBC Canadian

0.04

Correlation Coefficient

Solar Alliance  RBC Canadian

Significant diversification

The 3 months correlation between Solar and RBC is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Solar Alliance Energy and RBC Canadian Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Canadian Equity 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 RBC Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Canadian Equity has no effect on the direction of Solar Alliance i.e., Solar Alliance and RBC Canadian go up and down completely randomly.

Pair Corralation between Solar Alliance and RBC Canadian

Assuming the 90 days trading horizon Solar Alliance Energy is not expected to generate positive returns. Moreover, Solar Alliance is 17.54 times more volatile than RBC Canadian Equity. It trades away all of its potential returns to assume current level of volatility. RBC Canadian Equity is currently generating about 0.07 per unit of risk. If you would invest  3,277  in RBC Canadian Equity on December 30, 2024 and sell it today you would earn a total of  85.00  from holding RBC Canadian Equity or generate 2.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Solar Alliance Energy  vs.  RBC Canadian Equity

Solar Alliance Energy

Risk-Adjusted Performance

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.

RBC Canadian Equity

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Canadian Equity are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, RBC Canadian is not utilizing all of its potentials. The new stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Solar Alliance and RBC Canadian

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

The idea behind Solar Alliance Energy and RBC Canadian Equity 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.