Correlation Between SolTech Energy and Absolent Group

Can any of the company-specific risk be diversified away by investing in both SolTech Energy and Absolent Group 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 SolTech Energy and Absolent Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SolTech Energy Sweden and Absolent Group AB, you can compare the effects of market volatilities on SolTech Energy and Absolent Group 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 SolTech Energy with a short position of Absolent Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of SolTech Energy and Absolent Group.

Diversification Opportunities for SolTech Energy and Absolent Group

0.81

Correlation Coefficient

SolTech Energy  Absolent Group

Very poor diversification

The 3 months correlation between SolTech and Absolent is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding SolTech Energy Sweden and Absolent Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolent Group AB and SolTech Energy 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 SolTech Energy Sweden are associated (or correlated) with Absolent Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolent Group AB has no effect on the direction of SolTech Energy i.e., SolTech Energy and Absolent Group go up and down completely randomly.

Pair Corralation between SolTech Energy and Absolent Group

Assuming the 90 days trading horizon SolTech Energy Sweden is expected to under-perform the Absolent Group. In addition to that, SolTech Energy is 2.1 times more volatile than Absolent Group AB. It trades about -0.2 of its total potential returns per unit of risk. Absolent Group AB is currently generating about -0.17 per unit of volatility. If you would invest  37,300  in Absolent Group AB on September 22, 2024 and sell it today you would lose (12,200) from holding Absolent Group AB or give up 32.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.24%
Values	Daily Returns

SolTech Energy Sweden  vs.  Absolent Group AB

SolTech Energy Sweden

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SolTech Energy Sweden has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Absolent Group AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Absolent Group AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with SolTech Energy and Absolent Group

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

The idea behind SolTech Energy Sweden and Absolent Group AB 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.