Correlation Between Solar Alliance and Calfrac Well

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

Diversification Opportunities for Solar Alliance and Calfrac Well

0.41

Correlation Coefficient

Solar Alliance  Calfrac Well

Very weak diversification

The 3 months correlation between Solar and Calfrac is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Solar Alliance Energy and Calfrac Well Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calfrac Well Services 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 Calfrac Well. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calfrac Well Services has no effect on the direction of Solar Alliance i.e., Solar Alliance and Calfrac Well go up and down completely randomly.

Pair Corralation between Solar Alliance and Calfrac Well

Assuming the 90 days trading horizon Solar Alliance Energy is not expected to generate positive returns. Moreover, Solar Alliance is 7.06 times more volatile than Calfrac Well Services. It trades away all of its potential returns to assume current level of volatility. Calfrac Well Services is currently generating about 0.0 per unit of risk. If you would invest  3.00  in Solar Alliance Energy on December 30, 2024 and sell it today you would lose (1.00) from holding Solar Alliance Energy or give up 33.33% of portfolio value over 90 days.

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

Solar Alliance Energy  vs.  Calfrac Well Services

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.

Calfrac Well Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Calfrac Well Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Calfrac Well is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Solar Alliance and Calfrac Well

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

The idea behind Solar Alliance Energy and Calfrac Well Services 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.