Correlation Between SOLVE and Aelf
Can any of the company-specific risk be diversified away by investing in both SOLVE and Aelf 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 SOLVE and Aelf into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SOLVE and aelf, you can compare the effects of market volatilities on SOLVE and Aelf 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 SOLVE with a short position of Aelf. Check out your portfolio center. Please also check ongoing floating volatility patterns of SOLVE and Aelf.
Diversification Opportunities for SOLVE and Aelf
Very weak diversification
The 3 months correlation between SOLVE and Aelf is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding SOLVE and aelf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on aelf and SOLVE 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 SOLVE are associated (or correlated) with Aelf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of aelf has no effect on the direction of SOLVE i.e., SOLVE and Aelf go up and down completely randomly.
Pair Corralation between SOLVE and Aelf
Assuming the 90 days trading horizon SOLVE is expected to generate 1.35 times more return on investment than Aelf. However, SOLVE is 1.35 times more volatile than aelf. It trades about 0.22 of its potential returns per unit of risk. aelf is currently generating about -0.01 per unit of risk. If you would invest 2.13 in SOLVE on December 29, 2023 and sell it today you would earn a total of 0.64 from holding SOLVE or generate 30.05% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
SOLVE vs. aelf
Performance |
Timeline |
SOLVE |
aelf |
SOLVE and Aelf Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with SOLVE and Aelf
The main advantage of trading using opposite SOLVE and Aelf positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SOLVE position performs unexpectedly, Aelf 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 Aelf will offset losses from the drop in Aelf's long position.The idea behind SOLVE and aelf 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
Other Complementary Tools
Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
Transaction History View history of all your transactions and understand their impact on performance | |
Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon |