Correlation Between Bonheur and Scatec Solar

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

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

Diversification Opportunities for Bonheur and Scatec Solar

0.66

Correlation Coefficient

Bonheur  Scatec Solar

Poor diversification

The 3 months correlation between Bonheur and Scatec is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Bonheur and Scatec Solar OL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scatec Solar OL and Bonheur 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 Bonheur are associated (or correlated) with Scatec Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scatec Solar OL has no effect on the direction of Bonheur i.e., Bonheur and Scatec Solar go up and down completely randomly.

Pair Corralation between Bonheur and Scatec Solar

Assuming the 90 days trading horizon Bonheur is expected to generate 1.21 times less return on investment than Scatec Solar. But when comparing it to its historical volatility, Bonheur is 1.38 times less risky than Scatec Solar. It trades about 0.04 of its potential returns per unit of risk. Scatec Solar OL is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  7,755  in Scatec Solar OL on September 4, 2024 and sell it today you would earn a total of  235.00  from holding Scatec Solar OL or generate 3.03% return on investment over 90 days.

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

Bonheur  vs.  Scatec Solar OL

Bonheur

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bonheur are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Bonheur is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Scatec Solar OL

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Scatec Solar OL are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Scatec Solar is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Bonheur and Scatec Solar

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

The idea behind Bonheur and Scatec Solar OL 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.