Correlation Between Ebang International and Solution Financial

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

By analyzing existing cross correlation between Ebang International Holdings and Solution Financial, you can compare the effects of market volatilities on Ebang International and Solution Financial 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 Ebang International with a short position of Solution Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ebang International and Solution Financial.

Diversification Opportunities for Ebang International and Solution Financial

-0.59

Correlation Coefficient

Ebang International  Solution Financial

Excellent diversification

The 3 months correlation between Ebang and Solution is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Ebang International Holdings and Solution Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solution Financial and Ebang International 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 Ebang International Holdings are associated (or correlated) with Solution Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solution Financial has no effect on the direction of Ebang International i.e., Ebang International and Solution Financial go up and down completely randomly.

Pair Corralation between Ebang International and Solution Financial

Given the investment horizon of 90 days Ebang International Holdings is expected to generate 2.88 times more return on investment than Solution Financial. However, Ebang International is 2.88 times more volatile than Solution Financial. It trades about 0.1 of its potential returns per unit of risk. Solution Financial is currently generating about -0.06 per unit of risk. If you would invest  585.00  in Ebang International Holdings on September 5, 2024 and sell it today you would earn a total of  195.00  from holding Ebang International Holdings or generate 33.33% return on investment over 90 days.

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

Ebang International Holdings  vs.  Solution Financial

Ebang International

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ebang International Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Ebang International displayed solid returns over the last few months and may actually be approaching a breakup point.

Solution Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solution Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Ebang International and Solution Financial

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

The idea behind Ebang International Holdings and Solution Financial 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.