Correlation Between Solar Alliance and Guardian

Can any of the company-specific risk be diversified away by investing in both Solar Alliance and Guardian 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 Guardian 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 Guardian i3 Global, you can compare the effects of market volatilities on Solar Alliance and Guardian 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 Guardian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solar Alliance and Guardian.

Diversification Opportunities for Solar Alliance and Guardian

-0.61

Correlation Coefficient

Solar Alliance  Guardian

Excellent diversification

The 3 months correlation between Solar and Guardian is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Solar Alliance Energy and Guardian i3 Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guardian i3 Global 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 Guardian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guardian i3 Global has no effect on the direction of Solar Alliance i.e., Solar Alliance and Guardian go up and down completely randomly.

Pair Corralation between Solar Alliance and Guardian

Assuming the 90 days trading horizon Solar Alliance Energy is expected to generate 17.38 times more return on investment than Guardian. However, Solar Alliance is 17.38 times more volatile than Guardian i3 Global. It trades about 0.02 of its potential returns per unit of risk. Guardian i3 Global is currently generating about 0.17 per unit of risk. If you would invest  5.00  in Solar Alliance Energy on September 12, 2024 and sell it today you would lose (2.00) from holding Solar Alliance Energy or give up 40.0% of portfolio value over 90 days.

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

Solar Alliance Energy  vs.  Guardian i3 Global

Solar Alliance Energy

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Solar Alliance Energy are ranked lower than 1 (%) 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.

Guardian i3 Global

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guardian i3 Global are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Guardian may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Solar Alliance and Guardian

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

The idea behind Solar Alliance Energy and Guardian i3 Global 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.

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.