Correlation Between SolTech Energy and Arise Windpower

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

Diversification Opportunities for SolTech Energy and Arise Windpower

-0.05

Correlation Coefficient

SolTech Energy  Arise Windpower

Good diversification

The 3 months correlation between SolTech and Arise is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding SolTech Energy Sweden and Arise Windpower AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arise Windpower 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 Arise Windpower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arise Windpower AB has no effect on the direction of SolTech Energy i.e., SolTech Energy and Arise Windpower go up and down completely randomly.

Pair Corralation between SolTech Energy and Arise Windpower

Assuming the 90 days trading horizon SolTech Energy Sweden is expected to generate 5.47 times more return on investment than Arise Windpower. However, SolTech Energy is 5.47 times more volatile than Arise Windpower AB. It trades about 0.15 of its potential returns per unit of risk. Arise Windpower AB is currently generating about -0.04 per unit of risk. If you would invest  167.00  in SolTech Energy Sweden on December 30, 2024 and sell it today you would earn a total of  139.00  from holding SolTech Energy Sweden or generate 83.23% return on investment over 90 days.

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

SolTech Energy Sweden  vs.  Arise Windpower AB

SolTech Energy Sweden

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SolTech Energy Sweden are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, SolTech Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Arise Windpower AB

Risk-Adjusted Performance

Very Weak

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

Pair Trading with SolTech Energy and Arise Windpower

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

The idea behind SolTech Energy Sweden and Arise Windpower 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .