Correlation Between Spectra7 Microsystems and Solar Alliance

Can any of the company-specific risk be diversified away by investing in both Spectra7 Microsystems and Solar Alliance 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 Spectra7 Microsystems and Solar Alliance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Spectra7 Microsystems and Solar Alliance Energy, you can compare the effects of market volatilities on Spectra7 Microsystems and Solar Alliance 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 Spectra7 Microsystems with a short position of Solar Alliance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spectra7 Microsystems and Solar Alliance.

Diversification Opportunities for Spectra7 Microsystems and Solar Alliance

-0.15

Correlation Coefficient

Spectra7 Microsystems  Solar Alliance

Good diversification

The 3 months correlation between Spectra7 and Solar is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Spectra7 Microsystems and Solar Alliance Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solar Alliance Energy and Spectra7 Microsystems 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 Spectra7 Microsystems are associated (or correlated) with Solar Alliance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solar Alliance Energy has no effect on the direction of Spectra7 Microsystems i.e., Spectra7 Microsystems and Solar Alliance go up and down completely randomly.

Pair Corralation between Spectra7 Microsystems and Solar Alliance

Assuming the 90 days horizon Spectra7 Microsystems is expected to generate 0.87 times more return on investment than Solar Alliance. However, Spectra7 Microsystems is 1.15 times less risky than Solar Alliance. It trades about 0.07 of its potential returns per unit of risk. Solar Alliance Energy is currently generating about 0.04 per unit of risk. If you would invest  12.00  in Spectra7 Microsystems on September 17, 2024 and sell it today you would earn a total of  2.00  from holding Spectra7 Microsystems or generate 16.67% return on investment over 90 days.

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

Spectra7 Microsystems  vs.  Solar Alliance Energy

Spectra7 Microsystems

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Spectra7 Microsystems are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Spectra7 Microsystems showed solid returns over the last few months and may actually be approaching a breakup point.

Solar Alliance Energy

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Solar Alliance Energy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal essential indicators, Solar Alliance showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Spectra7 Microsystems and Solar Alliance

The main advantage of trading using opposite Spectra7 Microsystems and Solar Alliance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spectra7 Microsystems position performs unexpectedly, Solar Alliance 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 Solar Alliance will offset losses from the drop in Solar Alliance's long position.

The idea behind Spectra7 Microsystems and Solar Alliance Energy 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.