Correlation Between Solution Financial and Sparx Technology

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Can any of the company-specific risk be diversified away by investing in both Solution Financial and Sparx Technology 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 Solution Financial and Sparx Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Solution Financial and Sparx Technology, you can compare the effects of market volatilities on Solution Financial and Sparx Technology 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 Solution Financial with a short position of Sparx Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solution Financial and Sparx Technology.

Diversification Opportunities for Solution Financial and Sparx Technology

-0.51
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Solution and Sparx is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Solution Financial and Sparx Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparx Technology and Solution Financial 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 Solution Financial are associated (or correlated) with Sparx Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparx Technology has no effect on the direction of Solution Financial i.e., Solution Financial and Sparx Technology go up and down completely randomly.

Pair Corralation between Solution Financial and Sparx Technology

Assuming the 90 days trading horizon Solution Financial is expected to generate 13.74 times less return on investment than Sparx Technology. But when comparing it to its historical volatility, Solution Financial is 1.35 times less risky than Sparx Technology. It trades about 0.01 of its potential returns per unit of risk. Sparx Technology is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,632  in Sparx Technology on September 24, 2024 and sell it today you would earn a total of  110.00  from holding Sparx Technology or generate 4.18% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy90.91%
ValuesDaily Returns

Solution Financial  vs.  Sparx Technology

 Performance 
       Timeline  
Solution Financial 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Solution Financial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Solution Financial is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.
Sparx Technology 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Sparx Technology are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Sparx Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Solution Financial and Sparx Technology Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Solution Financial and Sparx Technology

The main advantage of trading using opposite Solution Financial and Sparx Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solution Financial position performs unexpectedly, Sparx Technology 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 Sparx Technology will offset losses from the drop in Sparx Technology's long position.
The idea behind Solution Financial and Sparx Technology 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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