Correlation Between Solaris Energy and Brunswick

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

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

Diversification Opportunities for Solaris Energy and Brunswick

0.28

Correlation Coefficient

Solaris Energy  Brunswick

Modest diversification

The 3 months correlation between Solaris and Brunswick is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Solaris Energy Infrastructure, and Brunswick in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brunswick and Solaris 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 Solaris Energy Infrastructure, are associated (or correlated) with Brunswick. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brunswick has no effect on the direction of Solaris Energy i.e., Solaris Energy and Brunswick go up and down completely randomly.

Pair Corralation between Solaris Energy and Brunswick

Considering the 90-day investment horizon Solaris Energy Infrastructure, is expected to generate 1.66 times more return on investment than Brunswick. However, Solaris Energy is 1.66 times more volatile than Brunswick. It trades about 0.35 of its potential returns per unit of risk. Brunswick is currently generating about 0.05 per unit of risk. If you would invest  1,200  in Solaris Energy Infrastructure, on September 3, 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 Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Solaris Energy Infrastructure,  vs.  Brunswick

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 uncertain technical and fundamental indicators, Solaris Energy demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Brunswick

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Brunswick are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Brunswick is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Solaris Energy and Brunswick

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

The idea behind Solaris Energy Infrastructure, and Brunswick 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.