Correlation Between National Energy and Solaris Energy

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

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

Diversification Opportunities for National Energy and Solaris Energy

-0.68

Correlation Coefficient

National Energy  Solaris Energy

Excellent diversification

The 3 months correlation between National and Solaris is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding National Energy Services and Solaris Energy Infrastructure, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solaris Energy Infra and National Energy 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 National Energy Services are associated (or correlated) with Solaris Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solaris Energy Infra has no effect on the direction of National Energy i.e., National Energy and Solaris Energy go up and down completely randomly.

Pair Corralation between National Energy and Solaris Energy

Given the investment horizon of 90 days National Energy is expected to generate 128.77 times less return on investment than Solaris Energy. But when comparing it to its historical volatility, National Energy Services is 1.22 times less risky than Solaris Energy. It trades about 0.0 of its potential returns per unit of risk. Solaris Energy Infrastructure, is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  1,200  in Solaris Energy Infrastructure, on September 2, 2024 and sell it today you would earn a total of  1,265  from holding Solaris Energy Infrastructure, or generate 105.42% return on investment over 90 days.

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

National Energy Services  vs.  Solaris Energy Infrastructure,

National Energy Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Energy Services has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, National Energy is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Solaris Energy Infra

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Solaris Energy Infrastructure, are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady technical and fundamental indicators, Solaris Energy demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Energy and Solaris Energy

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

The idea behind National Energy Services and Solaris Energy Infrastructure, 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.