Correlation Between Solaer Israel and Sunflow Sustain

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

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

Diversification Opportunities for Solaer Israel and Sunflow Sustain

0.17

Correlation Coefficient

Solaer Israel  Sunflow Sustain

Average diversification

The 3 months correlation between Solaer and Sunflow is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Solaer Israel and Sunflow Sustain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunflow Sustain and Solaer Israel 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 Solaer Israel are associated (or correlated) with Sunflow Sustain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunflow Sustain has no effect on the direction of Solaer Israel i.e., Solaer Israel and Sunflow Sustain go up and down completely randomly.

Pair Corralation between Solaer Israel and Sunflow Sustain

Assuming the 90 days trading horizon Solaer Israel is expected to generate 0.99 times more return on investment than Sunflow Sustain. However, Solaer Israel is 1.01 times less risky than Sunflow Sustain. It trades about 0.08 of its potential returns per unit of risk. Sunflow Sustain is currently generating about -0.04 per unit of risk. If you would invest  323,600  in Solaer Israel on September 15, 2024 and sell it today you would earn a total of  29,100  from holding Solaer Israel or generate 8.99% return on investment over 90 days.

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

Solaer Israel  vs.  Sunflow Sustain

Solaer Israel

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Solaer Israel are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Solaer Israel sustained solid returns over the last few months and may actually be approaching a breakup point.

Sunflow Sustain

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sunflow Sustain has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Solaer Israel and Sunflow Sustain

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

The idea behind Solaer Israel and Sunflow Sustain 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.