Correlation Between Solar Alliance and First National

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

Diversification Opportunities for Solar Alliance and First National

-0.08

Correlation Coefficient

Solar Alliance  First National

Good diversification

The 3 months correlation between Solar and First is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Solar Alliance Energy and First National Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First National Financial 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 First National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First National Financial has no effect on the direction of Solar Alliance i.e., Solar Alliance and First National go up and down completely randomly.

Pair Corralation between Solar Alliance and First National

Assuming the 90 days trading horizon Solar Alliance Energy is not expected to generate positive returns. Moreover, Solar Alliance is 10.15 times more volatile than First National Financial. It trades away all of its potential returns to assume current level of volatility. First National Financial is currently generating about 0.0 per unit of risk. If you would invest  1,536  in First National Financial on December 27, 2024 and sell it today you would lose (1.00) from holding First National Financial or give up 0.07% of portfolio value over 90 days.

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

Solar Alliance Energy  vs.  First National Financial

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.

First National Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days First National Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, First National is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Solar Alliance and First National

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

The idea behind Solar Alliance Energy and First National Financial 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..