Correlation Between Solar Alliance and First Asset

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

Diversification Opportunities for Solar Alliance and First Asset

-0.03

Correlation Coefficient

Solar Alliance  First Asset

Good diversification

The 3 months correlation between Solar and First is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Solar Alliance Energy and First Asset Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Asset Tech 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 Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Asset Tech has no effect on the direction of Solar Alliance i.e., Solar Alliance and First Asset go up and down completely randomly.

Pair Corralation between Solar Alliance and First Asset

Assuming the 90 days trading horizon Solar Alliance Energy is expected to under-perform the First Asset. In addition to that, Solar Alliance is 8.13 times more volatile than First Asset Tech. It trades about -0.05 of its total potential returns per unit of risk. First Asset Tech is currently generating about -0.01 per unit of volatility. If you would invest  2,135  in First Asset Tech on November 29, 2024 and sell it today you would lose (37.00) from holding First Asset Tech or give up 1.73% 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 Asset Tech

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

First Asset Tech

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Asset Tech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, First Asset is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Solar Alliance and First Asset

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

The idea behind Solar Alliance Energy and First Asset Tech 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.