Correlation Between SolTech Energy and Investment

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

Diversification Opportunities for SolTech Energy and Investment

0.14

Correlation Coefficient

SolTech Energy  Investment

Average diversification

The 3 months correlation between SolTech and Investment is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding SolTech Energy Sweden and Investment AB Oresund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment AB Oresund 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 Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment AB Oresund has no effect on the direction of SolTech Energy i.e., SolTech Energy and Investment go up and down completely randomly.

Pair Corralation between SolTech Energy and Investment

Assuming the 90 days trading horizon SolTech Energy Sweden is expected to generate 4.72 times more return on investment than Investment. However, SolTech Energy is 4.72 times more volatile than Investment AB Oresund. It trades about 0.24 of its potential returns per unit of risk. Investment AB Oresund is currently generating about 0.01 per unit of risk. If you would invest  214.00  in SolTech Energy Sweden on December 3, 2024 and sell it today you would earn a total of  279.00  from holding SolTech Energy Sweden or generate 130.37% return on investment over 90 days.

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

SolTech Energy Sweden  vs.  Investment AB Oresund

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.

Investment AB Oresund

Risk-Adjusted Performance

Very Weak

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

Pair Trading with SolTech Energy and Investment

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

The idea behind SolTech Energy Sweden and Investment AB Oresund 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.