Correlation Between SolTech Energy and Sdiptech

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

Diversification Opportunities for SolTech Energy and Sdiptech

0.38

Correlation Coefficient

SolTech Energy  Sdiptech

Weak diversification

The 3 months correlation between SolTech and Sdiptech is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding SolTech Energy Sweden and Sdiptech AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sdiptech 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 Sdiptech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sdiptech AB has no effect on the direction of SolTech Energy i.e., SolTech Energy and Sdiptech go up and down completely randomly.

Pair Corralation between SolTech Energy and Sdiptech

Assuming the 90 days trading horizon SolTech Energy Sweden is expected to generate 9.46 times more return on investment than Sdiptech. However, SolTech Energy is 9.46 times more volatile than Sdiptech AB. It trades about 0.23 of its potential returns per unit of risk. Sdiptech AB is currently generating about 0.07 per unit of risk. If you would invest  217.00  in SolTech Energy Sweden on December 2, 2024 and sell it today you would earn a total of  276.00  from holding SolTech Energy Sweden or generate 127.19% 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.  Sdiptech AB

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.

Sdiptech AB

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sdiptech AB are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Sdiptech is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with SolTech Energy and Sdiptech

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

The idea behind SolTech Energy Sweden and Sdiptech 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.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.