Correlation Between Solar Alliance and Mawer Balanced

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

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

Diversification Opportunities for Solar Alliance and Mawer Balanced

-0.56

Correlation Coefficient

Solar Alliance  Mawer Balanced

Excellent diversification

The 3 months correlation between Solar and Mawer is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Solar Alliance Energy and Mawer Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mawer Balanced and Solar Alliance 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 Solar Alliance Energy are associated (or correlated) with Mawer Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mawer Balanced has no effect on the direction of Solar Alliance i.e., Solar Alliance and Mawer Balanced go up and down completely randomly.

Pair Corralation between Solar Alliance and Mawer Balanced

Assuming the 90 days trading horizon Solar Alliance Energy is expected to under-perform the Mawer Balanced. In addition to that, Solar Alliance is 33.49 times more volatile than Mawer Balanced. It trades about -0.04 of its total potential returns per unit of risk. Mawer Balanced is currently generating about 0.2 per unit of volatility. If you would invest  3,687  in Mawer Balanced on August 31, 2024 and sell it today you would earn a total of  62.00  from holding Mawer Balanced or generate 1.68% return on investment over 90 days.

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

Solar Alliance Energy  vs.  Mawer Balanced

Solar Alliance Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solar Alliance Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable essential indicators, Solar Alliance is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Mawer Balanced

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mawer Balanced are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, Mawer Balanced is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Solar Alliance and Mawer Balanced

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

The idea behind Solar Alliance Energy and Mawer Balanced 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.