Correlation Between Sealed Air and Solaris Energy

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

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

Diversification Opportunities for Sealed Air and Solaris Energy

0.46

Correlation Coefficient

Sealed Air  Solaris Energy

Very weak diversification

The 3 months correlation between Sealed and Solaris is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Sealed Air 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 Sealed Air 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 Sealed Air 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 Sealed Air i.e., Sealed Air and Solaris Energy go up and down completely randomly.

Pair Corralation between Sealed Air and Solaris Energy

Considering the 90-day investment horizon Sealed Air is expected to generate 8.04 times less return on investment than Solaris Energy. But when comparing it to its historical volatility, Sealed Air is 2.76 times less risky than Solaris Energy. It trades about 0.12 of its potential returns per unit of risk. Solaris Energy Infrastructure, is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  1,147  in Solaris Energy Infrastructure, on September 12, 2024 and sell it today you would earn a total of  1,758  from holding Solaris Energy Infrastructure, or generate 153.27% return on investment over 90 days.

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

Sealed Air  vs.  Solaris Energy Infrastructure,

Sealed Air

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sealed Air are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting technical and fundamental indicators, Sealed Air may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Solaris Energy Infra

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Solaris Energy Infrastructure, are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak 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 Sealed Air and Solaris Energy

The main advantage of trading using opposite Sealed Air and Solaris Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sealed Air 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 Sealed Air 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.

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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 Anywhere module to track or share privately all of your investments from the convenience of any device.