Correlation Between SoundHound and Boralex

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

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

Diversification Opportunities for SoundHound and Boralex

-0.21

Correlation Coefficient

SoundHound  Boralex

Very good diversification

The 3 months correlation between SoundHound and Boralex is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding SoundHound AI and Boralex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boralex and SoundHound 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 SoundHound AI are associated (or correlated) with Boralex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boralex has no effect on the direction of SoundHound i.e., SoundHound and Boralex go up and down completely randomly.

Pair Corralation between SoundHound and Boralex

Given the investment horizon of 90 days SoundHound AI is expected to generate 3.39 times more return on investment than Boralex. However, SoundHound is 3.39 times more volatile than Boralex. It trades about 0.04 of its potential returns per unit of risk. Boralex is currently generating about -0.04 per unit of risk. If you would invest  1,015  in SoundHound AI on December 4, 2024 and sell it today you would lose (43.00) from holding SoundHound AI or give up 4.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	76.67%
Values	Daily Returns

SoundHound AI  vs.  Boralex

SoundHound AI

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SoundHound AI are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, SoundHound displayed solid returns over the last few months and may actually be approaching a breakup point.

Boralex

Risk-Adjusted Performance

Very Weak

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

Pair Trading with SoundHound and Boralex

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

The idea behind SoundHound AI and Boralex 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.