Correlation Between Solid State and Sitronix Technology

Can any of the company-specific risk be diversified away by investing in both Solid State and Sitronix Technology 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 Solid State and Sitronix Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Solid State System and Sitronix Technology Corp, you can compare the effects of market volatilities on Solid State and Sitronix Technology 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 Solid State with a short position of Sitronix Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solid State and Sitronix Technology.

Diversification Opportunities for Solid State and Sitronix Technology

0.72

Correlation Coefficient

Solid State  Sitronix Technology

Poor diversification

The 3 months correlation between Solid and Sitronix is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Solid State System and Sitronix Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sitronix Technology Corp and Solid State 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 Solid State System are associated (or correlated) with Sitronix Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sitronix Technology Corp has no effect on the direction of Solid State i.e., Solid State and Sitronix Technology go up and down completely randomly.

Pair Corralation between Solid State and Sitronix Technology

Assuming the 90 days trading horizon Solid State System is expected to generate 1.53 times more return on investment than Sitronix Technology. However, Solid State is 1.53 times more volatile than Sitronix Technology Corp. It trades about -0.01 of its potential returns per unit of risk. Sitronix Technology Corp is currently generating about -0.04 per unit of risk. If you would invest  2,635  in Solid State System on September 5, 2024 and sell it today you would lose (75.00) from holding Solid State System or give up 2.85% of portfolio value over 90 days.

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

Solid State System  vs.  Sitronix Technology Corp

Solid State System

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solid State System has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Solid State is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Sitronix Technology Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sitronix Technology Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Sitronix Technology is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Solid State and Sitronix Technology

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

The idea behind Solid State System and Sitronix Technology Corp 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.