Correlation Between Solar Alliance and MedMira

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

Diversification Opportunities for Solar Alliance and MedMira

0.23

Correlation Coefficient

Solar Alliance  MedMira

Modest diversification

The 3 months correlation between Solar and MedMira is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Solar Alliance Energy and MedMira in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MedMira 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 MedMira. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MedMira has no effect on the direction of Solar Alliance i.e., Solar Alliance and MedMira go up and down completely randomly.

Pair Corralation between Solar Alliance and MedMira

Assuming the 90 days trading horizon Solar Alliance Energy is expected to generate 1.39 times more return on investment than MedMira. However, Solar Alliance is 1.39 times more volatile than MedMira. It trades about 0.02 of its potential returns per unit of risk. MedMira is currently generating about 0.03 per unit of risk. If you would invest  7.00  in Solar Alliance Energy on September 20, 2024 and sell it today you would lose (4.00) from holding Solar Alliance Energy or give up 57.14% of portfolio value over 90 days.

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

Solar Alliance Energy  vs.  MedMira

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 abnormal essential indicators, Solar Alliance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

MedMira

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MedMira has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Solar Alliance and MedMira

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

The idea behind Solar Alliance Energy and MedMira 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.