Correlation Between Immersion and Solar Alliance

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

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

Diversification Opportunities for Immersion and Solar Alliance

0.09

Correlation Coefficient

Immersion  Solar Alliance

Significant diversification

The 3 months correlation between Immersion and Solar is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Immersion and Solar Alliance Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solar Alliance Energy and Immersion 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 Immersion are associated (or correlated) with Solar Alliance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solar Alliance Energy has no effect on the direction of Immersion i.e., Immersion and Solar Alliance go up and down completely randomly.

Pair Corralation between Immersion and Solar Alliance

Given the investment horizon of 90 days Immersion is expected to under-perform the Solar Alliance. But the stock apears to be less risky and, when comparing its historical volatility, Immersion is 4.15 times less risky than Solar Alliance. The stock trades about -0.07 of its potential returns per unit of risk. The Solar Alliance Energy is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  5.00  in Solar Alliance Energy on March 28, 2024 and sell it today you would earn a total of  0.00  from holding Solar Alliance Energy or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	91.3%
Values	Daily Returns

Immersion  vs.  Solar Alliance Energy

Immersion

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Immersion are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain primary indicators, Immersion reported solid returns over the last few months and may actually be approaching a breakup point.

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 weak essential indicators, Solar Alliance showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Immersion and Solar Alliance

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

The idea behind Immersion and Solar Alliance Energy 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 Commodity Directory module to find actively traded commodities issued by global exchanges.