Correlation Between SMA Solar and Solstad Offshore
Can any of the company-specific risk be diversified away by investing in both SMA Solar and Solstad Offshore 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 SMA Solar and Solstad Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SMA Solar Technology and Solstad Offshore ASA, you can compare the effects of market volatilities on SMA Solar and Solstad Offshore 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 SMA Solar with a short position of Solstad Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of SMA Solar and Solstad Offshore.
Diversification Opportunities for SMA Solar and Solstad Offshore
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between SMA and Solstad is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding SMA Solar Technology and Solstad Offshore ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solstad Offshore ASA and SMA Solar 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 SMA Solar Technology are associated (or correlated) with Solstad Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solstad Offshore ASA has no effect on the direction of SMA Solar i.e., SMA Solar and Solstad Offshore go up and down completely randomly.
Pair Corralation between SMA Solar and Solstad Offshore
Assuming the 90 days trading horizon SMA Solar Technology is expected to generate 1.26 times more return on investment than Solstad Offshore. However, SMA Solar is 1.26 times more volatile than Solstad Offshore ASA. It trades about 0.19 of its potential returns per unit of risk. Solstad Offshore ASA is currently generating about 0.19 per unit of risk. If you would invest 1,318 in SMA Solar Technology on October 15, 2024 and sell it today you would earn a total of 166.00 from holding SMA Solar Technology or generate 12.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SMA Solar Technology vs. Solstad Offshore ASA
Performance |
| Timeline |
| SMA Solar Technology |
| Solstad Offshore ASA |
SMA Solar and Solstad Offshore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SMA Solar and Solstad Offshore
The main advantage of trading using opposite SMA Solar and Solstad Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SMA Solar position performs unexpectedly, Solstad Offshore 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 Solstad Offshore will offset losses from the drop in Solstad Offshore's long position.| SMA Solar vs. Air Products Chemicals | SMA Solar vs. Creo Medical Group | SMA Solar vs. Extra Space Storage | SMA Solar vs. Wizz Air Holdings |
| Solstad Offshore vs. Costco Wholesale Corp | Solstad Offshore vs. National Beverage Corp | Solstad Offshore vs. Aeorema Communications Plc | Solstad Offshore vs. Spirent Communications plc |
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.
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