Correlation Between Surge Components and Solitron Devices

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

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

Diversification Opportunities for Surge Components and Solitron Devices

0.17

Correlation Coefficient

Surge Components  Solitron Devices

Average diversification

The 3 months correlation between Surge and Solitron is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Surge Components and Solitron Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solitron Devices and Surge Components 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 Surge Components are associated (or correlated) with Solitron Devices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solitron Devices has no effect on the direction of Surge Components i.e., Surge Components and Solitron Devices go up and down completely randomly.

Pair Corralation between Surge Components and Solitron Devices

Given the investment horizon of 90 days Surge Components is expected to generate 1.76 times more return on investment than Solitron Devices. However, Surge Components is 1.76 times more volatile than Solitron Devices. It trades about -0.04 of its potential returns per unit of risk. Solitron Devices is currently generating about -0.18 per unit of risk. If you would invest  225.00  in Surge Components on October 6, 2024 and sell it today you would lose (5.00) from holding Surge Components or give up 2.22% of portfolio value over 90 days.

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

Surge Components  vs.  Solitron Devices

Surge Components

Risk-Adjusted Performance

0 of 100

Very Weak

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

Solitron Devices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solitron Devices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Surge Components and Solitron Devices

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

The idea behind Surge Components and Solitron Devices 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 CEOs Directory module to screen CEOs from public companies around the world.