Correlation Between Q2 Metals and Solaris Resources

Can any of the company-specific risk be diversified away by investing in both Q2 Metals 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 Q2 Metals and Solaris Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Q2 Metals Corp and Solaris Resources, you can compare the effects of market volatilities on Q2 Metals 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 Q2 Metals with a short position of Solaris Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Q2 Metals and Solaris Resources.

Diversification Opportunities for Q2 Metals and Solaris Resources

-0.54

Correlation Coefficient

Q2 Metals  Solaris Resources

Excellent diversification

The 3 months correlation between QTWO and Solaris is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Q2 Metals Corp and Solaris Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solaris Resources and Q2 Metals 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 Q2 Metals Corp 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 Q2 Metals i.e., Q2 Metals and Solaris Resources go up and down completely randomly.

Pair Corralation between Q2 Metals and Solaris Resources

Assuming the 90 days trading horizon Q2 Metals Corp is expected to generate 2.21 times more return on investment than Solaris Resources. However, Q2 Metals is 2.21 times more volatile than Solaris Resources. It trades about 0.13 of its potential returns per unit of risk. Solaris Resources is currently generating about 0.04 per unit of risk. If you would invest  27.00  in Q2 Metals Corp on September 23, 2024 and sell it today you would earn a total of  51.00  from holding Q2 Metals Corp or generate 188.89% return on investment over 90 days.

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

Q2 Metals Corp  vs.  Solaris Resources

Q2 Metals Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Q2 Metals Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Q2 Metals showed solid returns over the last few months and may actually be approaching a breakup point.

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 Q2 Metals and Solaris Resources

The main advantage of trading using opposite Q2 Metals and Solaris Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Q2 Metals 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 Q2 Metals Corp 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.

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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.