Correlation Between Solar Alliance and BMO MSCI

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

Diversification Opportunities for Solar Alliance and BMO MSCI

0.34

Correlation Coefficient

Solar Alliance  BMO MSCI

Weak diversification

The 3 months correlation between Solar and BMO is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Solar Alliance Energy and BMO MSCI India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO MSCI India 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 BMO MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO MSCI India has no effect on the direction of Solar Alliance i.e., Solar Alliance and BMO MSCI go up and down completely randomly.

Pair Corralation between Solar Alliance and BMO MSCI

Assuming the 90 days trading horizon Solar Alliance Energy is not expected to generate positive returns. Moreover, Solar Alliance is 24.43 times more volatile than BMO MSCI India. It trades away all of its potential returns to assume current level of volatility. BMO MSCI India is currently generating about 0.39 per unit of risk. If you would invest  5,025  in BMO MSCI India on September 15, 2024 and sell it today you would earn a total of  299.00  from holding BMO MSCI India or generate 5.95% return on investment over 90 days.

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

Solar Alliance Energy  vs.  BMO MSCI India

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.

BMO MSCI India

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BMO MSCI India has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, BMO MSCI is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Solar Alliance and BMO MSCI

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

The idea behind Solar Alliance Energy and BMO MSCI India 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.