Correlation Between Solar Alliance and Faction Investment

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

Diversification Opportunities for Solar Alliance and Faction Investment

-0.28

Correlation Coefficient

Solar Alliance  Faction Investment

Very good diversification

The 3 months correlation between Solar and Faction is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Solar Alliance Energy and Faction Investment Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Faction Investment 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 Faction Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Faction Investment has no effect on the direction of Solar Alliance i.e., Solar Alliance and Faction Investment go up and down completely randomly.

Pair Corralation between Solar Alliance and Faction Investment

Assuming the 90 days trading horizon Solar Alliance Energy is not expected to generate positive returns. However, Solar Alliance Energy is 3.31 times less risky than Faction Investment. It waists most of its returns potential to compensate for thr risk taken. Faction Investment is generating about 0.18 per unit of risk. If you would invest  1.50  in Faction Investment Group on December 31, 2024 and sell it today you would earn a total of  13.50  from holding Faction Investment Group or generate 900.0% return on investment over 90 days.

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

Solar Alliance Energy  vs.  Faction Investment Group

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.

Faction Investment

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Faction Investment Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Faction Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Solar Alliance and Faction Investment

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

The idea behind Solar Alliance Energy and Faction Investment Group 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.