Correlation Between Solar Applied and Wafer Works

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

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

Diversification Opportunities for Solar Applied and Wafer Works

0.43

Correlation Coefficient

Solar Applied  Wafer Works

Very weak diversification

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

Pair Corralation between Solar Applied and Wafer Works

Assuming the 90 days trading horizon Solar Applied Materials is expected to generate 1.51 times more return on investment than Wafer Works. However, Solar Applied is 1.51 times more volatile than Wafer Works. It trades about 0.04 of its potential returns per unit of risk. Wafer Works is currently generating about -0.09 per unit of risk. If you would invest  6,100  in Solar Applied Materials on September 5, 2024 and sell it today you would earn a total of  230.00  from holding Solar Applied Materials or generate 3.77% return on investment over 90 days.

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

Solar Applied Materials  vs.  Wafer Works

Solar Applied Materials

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Solar Applied Materials are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Solar Applied is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Wafer Works

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wafer Works 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 Solar Applied and Wafer Works

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

The idea behind Solar Applied Materials and Wafer Works 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.

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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.