Correlation Between SolTech Energy and Norion Bank

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

Diversification Opportunities for SolTech Energy and Norion Bank

0.39

Correlation Coefficient

SolTech Energy  Norion Bank

Weak diversification

The 3 months correlation between SolTech and Norion is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding SolTech Energy Sweden and Norion Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norion Bank 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 Norion Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norion Bank has no effect on the direction of SolTech Energy i.e., SolTech Energy and Norion Bank go up and down completely randomly.

Pair Corralation between SolTech Energy and Norion Bank

Assuming the 90 days trading horizon SolTech Energy Sweden is expected to generate 2.06 times more return on investment than Norion Bank. However, SolTech Energy is 2.06 times more volatile than Norion Bank. It trades about 0.58 of its potential returns per unit of risk. Norion Bank is currently generating about 0.11 per unit of risk. If you would invest  180.00  in SolTech Energy Sweden on December 1, 2024 and sell it today you would earn a total of  313.00  from holding SolTech Energy Sweden or generate 173.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

SolTech Energy Sweden  vs.  Norion Bank

SolTech Energy Sweden

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SolTech Energy Sweden are ranked lower than 18 (%) 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.

Norion Bank

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Norion Bank are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Norion Bank is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SolTech Energy and Norion Bank

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

The idea behind SolTech Energy Sweden and Norion Bank 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 Global Correlations module to find global opportunities by holding instruments from different markets.