Correlation Between Canoe EIT and Solaris Resources

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

By analyzing existing cross correlation between Canoe EIT Income and Solaris Resources, you can compare the effects of market volatilities on Canoe EIT and Solaris Resources 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 Canoe EIT with a short position of Solaris Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canoe EIT and Solaris Resources.

Diversification Opportunities for Canoe EIT and Solaris Resources

0.63

Correlation Coefficient

Canoe EIT  Solaris Resources

Poor diversification

The 3 months correlation between Canoe and Solaris is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Canoe EIT Income and Solaris Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solaris Resources and Canoe EIT 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 Canoe EIT Income are associated (or correlated) with Solaris Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solaris Resources has no effect on the direction of Canoe EIT i.e., Canoe EIT and Solaris Resources go up and down completely randomly.

Pair Corralation between Canoe EIT and Solaris Resources

Assuming the 90 days trading horizon Canoe EIT is expected to generate 5.24 times less return on investment than Solaris Resources. But when comparing it to its historical volatility, Canoe EIT Income is 7.86 times less risky than Solaris Resources. It trades about 0.17 of its potential returns per unit of risk. Solaris Resources is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  345.00  in Solaris Resources on September 23, 2024 and sell it today you would earn a total of  106.00  from holding Solaris Resources or generate 30.72% return on investment over 90 days.

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

Canoe EIT Income  vs.  Solaris Resources

Canoe EIT Income

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Canoe EIT Income are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Canoe EIT is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Solaris Resources

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with Canoe EIT and Solaris Resources

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

The idea behind Canoe EIT Income and Solaris Resources 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.