Correlation Between SolarBank and Cars
Can any of the company-specific risk be diversified away by investing in both SolarBank and Cars 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 SolarBank and Cars into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SolarBank and Cars Inc, you can compare the effects of market volatilities on SolarBank and Cars 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 SolarBank with a short position of Cars. Check out your portfolio center. Please also check ongoing floating volatility patterns of SolarBank and Cars.
Diversification Opportunities for SolarBank and Cars
Very weak diversification
The 3 months correlation between SolarBank and Cars is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding SolarBank and Cars Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cars Inc and SolarBank 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 SolarBank are associated (or correlated) with Cars. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cars Inc has no effect on the direction of SolarBank i.e., SolarBank and Cars go up and down completely randomly.
Pair Corralation between SolarBank and Cars
Assuming the 90 days horizon SolarBank is expected to generate 2.25 times more return on investment than Cars. However, SolarBank is 2.25 times more volatile than Cars Inc. It trades about 0.21 of its potential returns per unit of risk. Cars Inc is currently generating about 0.04 per unit of risk. If you would invest 470.00 in SolarBank on September 2, 2024 and sell it today you would earn a total of 180.00 from holding SolarBank or generate 38.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 6.85% |
| Values | Daily Returns |
SolarBank vs. Cars Inc
Performance |
| Timeline |
| SolarBank |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Cars Inc |
SolarBank and Cars Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SolarBank and Cars
The main advantage of trading using opposite SolarBank and Cars positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SolarBank position performs unexpectedly, Cars 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 Cars will offset losses from the drop in Cars' long position.| SolarBank vs. Oatly Group AB | SolarBank vs. Vita Coco | SolarBank vs. Warner Music Group | SolarBank vs. Constellation Brands Class |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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