Correlation Between SolTech Energy and Bio Works
Can any of the company-specific risk be diversified away by investing in both SolTech Energy and Bio Works 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 SolTech Energy and Bio Works into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SolTech Energy Sweden and Bio Works Technologies AB, you can compare the effects of market volatilities on SolTech Energy and Bio Works 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 SolTech Energy with a short position of Bio Works. Check out your portfolio center. Please also check ongoing floating volatility patterns of SolTech Energy and Bio Works.
Diversification Opportunities for SolTech Energy and Bio Works
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between SolTech and Bio is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding SolTech Energy Sweden and Bio Works Technologies AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bio Works Technologies and SolTech 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 SolTech Energy Sweden are associated (or correlated) with Bio Works. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bio Works Technologies has no effect on the direction of SolTech Energy i.e., SolTech Energy and Bio Works go up and down completely randomly.
Pair Corralation between SolTech Energy and Bio Works
Assuming the 90 days trading horizon SolTech Energy Sweden is expected to generate 0.62 times more return on investment than Bio Works. However, SolTech Energy Sweden is 1.6 times less risky than Bio Works. It trades about -0.09 of its potential returns per unit of risk. Bio Works Technologies AB is currently generating about -0.08 per unit of risk. If you would invest 1,111 in SolTech Energy Sweden on September 1, 2024 and sell it today you would lose (877.00) from holding SolTech Energy Sweden or give up 78.94% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SolTech Energy Sweden vs. Bio Works Technologies AB
Performance |
| Timeline |
| SolTech Energy Sweden |
| Bio Works Technologies |
SolTech Energy and Bio Works Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SolTech Energy and Bio Works
The main advantage of trading using opposite SolTech Energy and Bio Works positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SolTech Energy position performs unexpectedly, Bio Works 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 Bio Works will offset losses from the drop in Bio Works' long position.| SolTech Energy vs. Eolus Vind AB | SolTech Energy vs. Sinch AB | SolTech Energy vs. Embracer Group AB | SolTech Energy vs. Powercell Sweden |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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