Correlation Between Solaris Energy and Natural Gas
Can any of the company-specific risk be diversified away by investing in both Solaris Energy and Natural Gas 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 Solaris Energy and Natural Gas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Solaris Energy Infrastructure, and Natural Gas Services, you can compare the effects of market volatilities on Solaris Energy and Natural Gas 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 Solaris Energy with a short position of Natural Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solaris Energy and Natural Gas.
Diversification Opportunities for Solaris Energy and Natural Gas
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Solaris and Natural is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Solaris Energy Infrastructure, and Natural Gas Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natural Gas Services and Solaris Energy 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 Solaris Energy Infrastructure, are associated (or correlated) with Natural Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natural Gas Services has no effect on the direction of Solaris Energy i.e., Solaris Energy and Natural Gas go up and down completely randomly.
Pair Corralation between Solaris Energy and Natural Gas
Considering the 90-day investment horizon Solaris Energy Infrastructure, is expected to generate 1.33 times more return on investment than Natural Gas. However, Solaris Energy is 1.33 times more volatile than Natural Gas Services. It trades about 0.59 of its potential returns per unit of risk. Natural Gas Services is currently generating about 0.47 per unit of risk. If you would invest 1,333 in Solaris Energy Infrastructure, on August 27, 2024 and sell it today you would earn a total of 940.00 from holding Solaris Energy Infrastructure, or generate 70.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Solaris Energy Infrastructure, vs. Natural Gas Services
Performance |
| Timeline |
| Solaris Energy Infra |
| Natural Gas Services |
Solaris Energy and Natural Gas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Solaris Energy and Natural Gas
The main advantage of trading using opposite Solaris Energy and Natural Gas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solaris Energy position performs unexpectedly, Natural Gas 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 Natural Gas will offset losses from the drop in Natural Gas' long position.| Solaris Energy vs. ProPetro Holding Corp | Solaris Energy vs. RPC Inc | Solaris Energy vs. MRC Global | Solaris Energy vs. Expro Group Holdings |
| Natural Gas vs. ProPetro Holding Corp | Natural Gas vs. RPC Inc | Natural Gas vs. MRC Global | Natural Gas vs. Expro Group Holdings |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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