Correlation Between Solar Alliance and Birchcliff Energy

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

Diversification Opportunities for Solar Alliance and Birchcliff Energy

-0.35

Correlation Coefficient

Solar Alliance  Birchcliff Energy

Very good diversification

The 3 months correlation between Solar and Birchcliff is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Solar Alliance Energy and Birchcliff Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Birchcliff Energy 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 Birchcliff Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Birchcliff Energy has no effect on the direction of Solar Alliance i.e., Solar Alliance and Birchcliff Energy go up and down completely randomly.

Pair Corralation between Solar Alliance and Birchcliff Energy

Assuming the 90 days trading horizon Solar Alliance Energy is expected to under-perform the Birchcliff Energy. In addition to that, Solar Alliance is 4.96 times more volatile than Birchcliff Energy. It trades about -0.01 of its total potential returns per unit of risk. Birchcliff Energy is currently generating about 0.05 per unit of volatility. If you would invest  519.00  in Birchcliff Energy on November 29, 2024 and sell it today you would earn a total of  32.00  from holding Birchcliff Energy or generate 6.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Solar Alliance Energy  vs.  Birchcliff Energy

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 latest abnormal performance, the Stock's essential indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Birchcliff Energy

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Birchcliff Energy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Birchcliff Energy may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Solar Alliance and Birchcliff Energy

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

The idea behind Solar Alliance Energy and Birchcliff Energy 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.