Correlation Between SolTech Energy and International Petroleum
Can any of the company-specific risk be diversified away by investing in both SolTech Energy and International Petroleum 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 International Petroleum 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 International Petroleum, you can compare the effects of market volatilities on SolTech Energy and International Petroleum 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 International Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of SolTech Energy and International Petroleum.
Diversification Opportunities for SolTech Energy and International Petroleum
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SolTech and International is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding SolTech Energy Sweden and International Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Petroleum 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 International Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Petroleum has no effect on the direction of SolTech Energy i.e., SolTech Energy and International Petroleum go up and down completely randomly.
Pair Corralation between SolTech Energy and International Petroleum
Assuming the 90 days trading horizon SolTech Energy Sweden is expected to under-perform the International Petroleum. In addition to that, SolTech Energy is 2.34 times more volatile than International Petroleum. It trades about -0.33 of its total potential returns per unit of risk. International Petroleum is currently generating about 0.03 per unit of volatility. If you would invest 12,180 in International Petroleum on August 29, 2024 and sell it today you would earn a total of 120.00 from holding International Petroleum or generate 0.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SolTech Energy Sweden vs. International Petroleum
Performance |
| Timeline |
| SolTech Energy Sweden |
| International Petroleum |
SolTech Energy and International Petroleum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SolTech Energy and International Petroleum
The main advantage of trading using opposite SolTech Energy and International Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SolTech Energy position performs unexpectedly, International Petroleum 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 International Petroleum will offset losses from the drop in International Petroleum's long position.| SolTech Energy vs. Eolus Vind AB | SolTech Energy vs. Sinch AB | SolTech Energy vs. Embracer Group AB | SolTech Energy vs. Powercell Sweden |
| International Petroleum vs. Africa Oil Corp | International Petroleum vs. Tethys Oil AB | International Petroleum vs. Maha Energy AB | International Petroleum vs. Cortus Energy AB |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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