Correlation Between StShine Optical and Solar Applied

Can any of the company-specific risk be diversified away by investing in both StShine Optical and Solar Applied 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 StShine Optical and Solar Applied into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between StShine Optical Co and Solar Applied Materials, you can compare the effects of market volatilities on StShine Optical and Solar Applied 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 StShine Optical with a short position of Solar Applied. Check out your portfolio center. Please also check ongoing floating volatility patterns of StShine Optical and Solar Applied.

Diversification Opportunities for StShine Optical and Solar Applied

-0.27

Correlation Coefficient

StShine Optical  Solar Applied

Very good diversification

The 3 months correlation between StShine and Solar is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding StShine Optical Co and Solar Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solar Applied Materials and StShine Optical 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 StShine Optical Co are associated (or correlated) with Solar Applied. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solar Applied Materials has no effect on the direction of StShine Optical i.e., StShine Optical and Solar Applied go up and down completely randomly.

Pair Corralation between StShine Optical and Solar Applied

Assuming the 90 days trading horizon StShine Optical Co is expected to generate 0.88 times more return on investment than Solar Applied. However, StShine Optical Co is 1.14 times less risky than Solar Applied. It trades about 0.18 of its potential returns per unit of risk. Solar Applied Materials is currently generating about -0.07 per unit of risk. If you would invest  17,750  in StShine Optical Co on September 2, 2024 and sell it today you would earn a total of  4,650  from holding StShine Optical Co or generate 26.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

StShine Optical Co  vs.  Solar Applied Materials

StShine Optical

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in StShine Optical Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, StShine Optical showed solid returns over the last few months and may actually be approaching a breakup point.

Solar Applied Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solar Applied Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with StShine Optical and Solar Applied

The main advantage of trading using opposite StShine Optical and Solar Applied positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if StShine Optical position performs unexpectedly, Solar Applied 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 Solar Applied will offset losses from the drop in Solar Applied's long position.

The idea behind StShine Optical Co and Solar Applied Materials 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.