Correlation Between Solar Applied and Eternal Materials
Can any of the company-specific risk be diversified away by investing in both Solar Applied and Eternal Materials 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 Solar Applied and Eternal Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Solar Applied Materials and Eternal Materials Co, you can compare the effects of market volatilities on Solar Applied and Eternal Materials 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 Solar Applied with a short position of Eternal Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solar Applied and Eternal Materials.
Diversification Opportunities for Solar Applied and Eternal Materials
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Solar and Eternal is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Solar Applied Materials and Eternal Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eternal Materials and Solar Applied 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 Solar Applied Materials are associated (or correlated) with Eternal Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eternal Materials has no effect on the direction of Solar Applied i.e., Solar Applied and Eternal Materials go up and down completely randomly.
Pair Corralation between Solar Applied and Eternal Materials
Assuming the 90 days trading horizon Solar Applied Materials is expected to generate 1.82 times more return on investment than Eternal Materials. However, Solar Applied is 1.82 times more volatile than Eternal Materials Co. It trades about 0.07 of its potential returns per unit of risk. Eternal Materials Co is currently generating about 0.0 per unit of risk. If you would invest 3,161 in Solar Applied Materials on September 3, 2024 and sell it today you would earn a total of 2,789 from holding Solar Applied Materials or generate 88.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Solar Applied Materials vs. Eternal Materials Co
Performance |
| Timeline |
| Solar Applied Materials |
| Eternal Materials |
Solar Applied and Eternal Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Solar Applied and Eternal Materials
The main advantage of trading using opposite Solar Applied and Eternal Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solar Applied position performs unexpectedly, Eternal Materials 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 Eternal Materials will offset losses from the drop in Eternal Materials' long position.| Solar Applied vs. Catcher Technology Co | Solar Applied vs. Evergreen Steel Corp | Solar Applied vs. China Metal Products | Solar Applied vs. Chernan Metal Industrial |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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