Correlation Between Solteq PLC and Nightingale Health

Can any of the company-specific risk be diversified away by investing in both Solteq PLC and Nightingale Health 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 Solteq PLC and Nightingale Health into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Solteq PLC and Nightingale Health Oyj, you can compare the effects of market volatilities on Solteq PLC and Nightingale Health 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 Solteq PLC with a short position of Nightingale Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solteq PLC and Nightingale Health.

Diversification Opportunities for Solteq PLC and Nightingale Health

0.37

Correlation Coefficient

Solteq PLC  Nightingale Health

Weak diversification

The 3 months correlation between Solteq and Nightingale is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Solteq PLC and Nightingale Health Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nightingale Health Oyj and Solteq PLC 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 Solteq PLC are associated (or correlated) with Nightingale Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nightingale Health Oyj has no effect on the direction of Solteq PLC i.e., Solteq PLC and Nightingale Health go up and down completely randomly.

Pair Corralation between Solteq PLC and Nightingale Health

Assuming the 90 days trading horizon Solteq PLC is expected to generate 0.79 times more return on investment than Nightingale Health. However, Solteq PLC is 1.26 times less risky than Nightingale Health. It trades about 0.02 of its potential returns per unit of risk. Nightingale Health Oyj is currently generating about -0.03 per unit of risk. If you would invest  64.00  in Solteq PLC on September 5, 2024 and sell it today you would earn a total of  0.00  from holding Solteq PLC or generate 0.0% return on investment over 90 days.

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

Solteq PLC  vs.  Nightingale Health Oyj

Solteq PLC

Risk-Adjusted Performance

1 of 100

Very Weak

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

Nightingale Health Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nightingale Health Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Solteq PLC and Nightingale Health

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

The idea behind Solteq PLC and Nightingale Health Oyj 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.