Correlation Between Xinyi Solar and Solar Integrated

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

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

Diversification Opportunities for Xinyi Solar and Solar Integrated

-0.09

Correlation Coefficient

Xinyi Solar  Solar Integrated

Good diversification

The 3 months correlation between Xinyi and Solar is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Xinyi Solar Holdings and Solar Integrated Roofing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solar Integrated Roofing and Xinyi Solar 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 Xinyi Solar Holdings are associated (or correlated) with Solar Integrated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solar Integrated Roofing has no effect on the direction of Xinyi Solar i.e., Xinyi Solar and Solar Integrated go up and down completely randomly.

Pair Corralation between Xinyi Solar and Solar Integrated

Assuming the 90 days horizon Xinyi Solar is expected to generate 59.86 times less return on investment than Solar Integrated. But when comparing it to its historical volatility, Xinyi Solar Holdings is 25.4 times less risky than Solar Integrated. It trades about 0.07 of its potential returns per unit of risk. Solar Integrated Roofing is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  0.01  in Solar Integrated Roofing on September 15, 2024 and sell it today you would earn a total of  0.00  from holding Solar Integrated Roofing or generate 0.0% return on investment over 90 days.

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

Xinyi Solar Holdings  vs.  Solar Integrated Roofing

Xinyi Solar Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Xinyi Solar Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, Xinyi Solar reported solid returns over the last few months and may actually be approaching a breakup point.

Solar Integrated Roofing

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Solar Integrated Roofing are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Solar Integrated exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xinyi Solar and Solar Integrated

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

The idea behind Xinyi Solar Holdings and Solar Integrated Roofing 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.