Correlation Between Solar Alliance and First Trust
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 Senior, 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
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Solar and First is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Solar Alliance Energy and First Trust Senior in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Senior 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 Senior 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 generate 14.62 times more return on investment than First Trust. However, Solar Alliance is 14.62 times more volatile than First Trust Senior. It trades about 0.02 of its potential returns per unit of risk. First Trust Senior is currently generating about 0.04 per unit of risk. If you would invest 4.00 in Solar Alliance Energy on August 29, 2024 and sell it today you would lose (0.50) from holding Solar Alliance Energy or give up 12.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Solar Alliance Energy vs. First Trust Senior
Performance |
| Timeline |
| Solar Alliance Energy |
| First Trust Senior |
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.| Solar Alliance vs. Braille Energy Systems | Solar Alliance vs. Therma Bright | Solar Alliance vs. CryptoStar Corp | Solar Alliance vs. Manganese X Energy |
| First Trust vs. First Trust Global | First Trust vs. FT AlphaDEX Industrials | First Trust vs. First Trust Value | First Trust vs. Global X Active |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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