Correlation Between Solar Alliance and Metro

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

Diversification Opportunities for Solar Alliance and Metro

-0.68

Correlation Coefficient

Solar Alliance  Metro

Excellent diversification

The 3 months correlation between Solar and Metro is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Solar Alliance Energy and Metro Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro Inc 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 Metro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro Inc has no effect on the direction of Solar Alliance i.e., Solar Alliance and Metro go up and down completely randomly.

Pair Corralation between Solar Alliance and Metro

Assuming the 90 days trading horizon Solar Alliance Energy is expected to under-perform the Metro. In addition to that, Solar Alliance is 8.35 times more volatile than Metro Inc. It trades about -0.23 of its total potential returns per unit of risk. Metro Inc is currently generating about -0.22 per unit of volatility. If you would invest  9,278  in Metro Inc on October 5, 2024 and sell it today you would lose (261.00) from holding Metro Inc or give up 2.81% 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.  Metro Inc

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 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.

Metro Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Metro Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Metro may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Solar Alliance and Metro

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

The idea behind Solar Alliance Energy and Metro Inc 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.