Correlation Between Solar Alliance and CoinSmart Financial

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

Diversification Opportunities for Solar Alliance and CoinSmart Financial

0.0

Correlation Coefficient

Solar Alliance  CoinSmart Financial

Pay attention - limited upside

The 3 months correlation between Solar and CoinSmart is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Solar Alliance Energy and CoinSmart Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CoinSmart 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 CoinSmart Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CoinSmart Financial has no effect on the direction of Solar Alliance i.e., Solar Alliance and CoinSmart Financial go up and down completely randomly.

Pair Corralation between Solar Alliance and CoinSmart Financial

Assuming the 90 days trading horizon Solar Alliance is expected to generate 1.4 times less return on investment than CoinSmart Financial. In addition to that, Solar Alliance is 2.29 times more volatile than CoinSmart Financial. It trades about 0.02 of its total potential returns per unit of risk. CoinSmart Financial is currently generating about 0.05 per unit of volatility. If you would invest  12.00  in CoinSmart Financial on October 5, 2024 and sell it today you would earn a total of  10.00  from holding CoinSmart Financial or generate 83.33% return on investment over 90 days.

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

Solar Alliance Energy  vs.  CoinSmart Financial

Solar Alliance Energy

Risk-Adjusted Performance

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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.

CoinSmart Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CoinSmart Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, CoinSmart Financial is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Solar Alliance and CoinSmart Financial

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

The idea behind Solar Alliance Energy and CoinSmart 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.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.