Correlation Between Solaris Energy and Natural Gas

Can any of the company-specific risk be diversified away by investing in both Solaris Energy and Natural Gas 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 Natural Gas 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 Natural Gas Services, you can compare the effects of market volatilities on Solaris Energy and Natural Gas 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 Natural Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solaris Energy and Natural Gas.

Diversification Opportunities for Solaris Energy and Natural Gas

0.97

Correlation Coefficient

Solaris Energy  Natural Gas

Almost no diversification

The 3 months correlation between Solaris and Natural is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Solaris Energy Infrastructure, and Natural Gas Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natural Gas Services 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 Natural Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natural Gas Services has no effect on the direction of Solaris Energy i.e., Solaris Energy and Natural Gas go up and down completely randomly.

Pair Corralation between Solaris Energy and Natural Gas

Considering the 90-day investment horizon Solaris Energy Infrastructure, is expected to generate 1.24 times more return on investment than Natural Gas. However, Solaris Energy is 1.24 times more volatile than Natural Gas Services. It trades about 0.35 of its potential returns per unit of risk. Natural Gas Services is currently generating about 0.19 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 Strong
Accuracy	100.0%
Values	Daily Returns

Solaris Energy Infrastructure,  vs.  Natural Gas Services

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.

Natural Gas Services

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Natural Gas Services are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Natural Gas unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Solaris Energy and Natural Gas

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

The idea behind Solaris Energy Infrastructure, and Natural Gas Services 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.