Correlation Between Solar Alliance and IShares Global

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

Diversification Opportunities for Solar Alliance and IShares Global

-0.41

Correlation Coefficient

Solar Alliance  IShares Global

Very good diversification

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

Pair Corralation between Solar Alliance and IShares Global

Assuming the 90 days trading horizon Solar Alliance Energy is expected to generate 18.79 times more return on investment than IShares Global. However, Solar Alliance is 18.79 times more volatile than iShares Global Water. It trades about 0.02 of its potential returns per unit of risk. iShares Global Water is currently generating about 0.11 per unit of risk. If you would invest  5.00  in Solar Alliance Energy on September 3, 2024 and sell it today you would lose (1.50) from holding Solar Alliance Energy or give up 30.0% 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.  iShares Global Water

Solar Alliance Energy

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Solar Alliance Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal essential indicators, Solar Alliance showed solid returns over the last few months and may actually be approaching a breakup point.

iShares Global Water

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Global Water are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares Global is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Solar Alliance and IShares Global

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

The idea behind Solar Alliance Energy and iShares Global Water 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.