Correlation Between Solar Alliance and First Trust

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

Diversification Opportunities for Solar Alliance and First Trust

-0.43
  Correlation Coefficient

Very good diversification

The 3 months correlation between Solar and First is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Solar Alliance Energy and First Trust Indxx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Indxx and Solar Alliance 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 Alliance Energy are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Indxx has no effect on the direction of Solar Alliance i.e., Solar Alliance and First Trust go up and down completely randomly.

Pair Corralation between Solar Alliance and First Trust

Assuming the 90 days trading horizon Solar Alliance Energy is expected to under-perform the First Trust. In addition to that, Solar Alliance is 53.37 times more volatile than First Trust Indxx. It trades about -0.04 of its total potential returns per unit of risk. First Trust Indxx is currently generating about -0.21 per unit of volatility. If you would invest  1,166  in First Trust Indxx on August 31, 2024 and sell it today you would lose (13.00) from holding First Trust Indxx or give up 1.11% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Solar Alliance Energy  vs.  First Trust Indxx

 Performance 
       Timeline  
Solar Alliance Energy 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Solar Alliance Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable essential indicators, Solar Alliance is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.
First Trust Indxx 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Indxx are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, First Trust is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Solar Alliance and First Trust Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Solar Alliance and First Trust

The main advantage of trading using opposite Solar Alliance and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solar Alliance position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.
The idea behind Solar Alliance Energy and First Trust Indxx 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.

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