Correlation Between INFORMATION SVC and SolarEdge Technologies

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

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

Diversification Opportunities for INFORMATION SVC and SolarEdge Technologies

-0.56

Correlation Coefficient

INFORMATION SVC  SolarEdge Technologies

Excellent diversification

The 3 months correlation between INFORMATION and SolarEdge is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding INFORMATION SVC GRP and SolarEdge Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SolarEdge Technologies and INFORMATION SVC 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 INFORMATION SVC GRP are associated (or correlated) with SolarEdge Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SolarEdge Technologies has no effect on the direction of INFORMATION SVC i.e., INFORMATION SVC and SolarEdge Technologies go up and down completely randomly.

Pair Corralation between INFORMATION SVC and SolarEdge Technologies

Assuming the 90 days horizon INFORMATION SVC GRP is expected to generate 0.33 times more return on investment than SolarEdge Technologies. However, INFORMATION SVC GRP is 3.07 times less risky than SolarEdge Technologies. It trades about 0.14 of its potential returns per unit of risk. SolarEdge Technologies is currently generating about -0.09 per unit of risk. If you would invest  296.00  in INFORMATION SVC GRP on September 17, 2024 and sell it today you would earn a total of  54.00  from holding INFORMATION SVC GRP or generate 18.24% return on investment over 90 days.

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

INFORMATION SVC GRP  vs.  SolarEdge Technologies

INFORMATION SVC GRP

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in INFORMATION SVC GRP are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, INFORMATION SVC reported solid returns over the last few months and may actually be approaching a breakup point.

SolarEdge Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SolarEdge Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with INFORMATION SVC and SolarEdge Technologies

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

The idea behind INFORMATION SVC GRP and SolarEdge Technologies 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..