Correlation Between Solar Alliance and Emera Pref

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

Diversification Opportunities for Solar Alliance and Emera Pref

-0.77

Correlation Coefficient

Solar Alliance  Emera Pref

Pay attention - limited upside

The 3 months correlation between Solar and Emera is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Solar Alliance Energy and Emera Pref F in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emera Pref F 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 Emera Pref. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emera Pref F has no effect on the direction of Solar Alliance i.e., Solar Alliance and Emera Pref go up and down completely randomly.

Pair Corralation between Solar Alliance and Emera Pref

Assuming the 90 days trading horizon Solar Alliance Energy is expected to generate 8.68 times more return on investment than Emera Pref. However, Solar Alliance is 8.68 times more volatile than Emera Pref F. It trades about 0.01 of its potential returns per unit of risk. Emera Pref F is currently generating about 0.09 per unit of risk. If you would invest  8.00  in Solar Alliance Energy on October 24, 2024 and sell it today you would lose (5.50) from holding Solar Alliance Energy or give up 68.75% of portfolio value over 90 days.

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

Solar Alliance Energy  vs.  Emera Pref F

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 abnormal performance in the last few months, the Stock's essential indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Emera Pref F

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Emera Pref F are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Emera Pref sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Solar Alliance and Emera Pref

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

The idea behind Solar Alliance Energy and Emera Pref F 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.