Correlation Between SMA Solar and Volkswagen
Can any of the company-specific risk be diversified away by investing in both SMA Solar and Volkswagen 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 Volkswagen 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 Volkswagen AG Non Vtg, you can compare the effects of market volatilities on SMA Solar and Volkswagen 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 Volkswagen. Check out your portfolio center. Please also check ongoing floating volatility patterns of SMA Solar and Volkswagen.
Diversification Opportunities for SMA Solar and Volkswagen
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SMA and Volkswagen is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding SMA Solar Technology and Volkswagen AG Non Vtg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG Non 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 Volkswagen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volkswagen AG Non has no effect on the direction of SMA Solar i.e., SMA Solar and Volkswagen go up and down completely randomly.
Pair Corralation between SMA Solar and Volkswagen
Assuming the 90 days trading horizon SMA Solar is expected to generate 2.01 times less return on investment than Volkswagen. In addition to that, SMA Solar is 3.0 times more volatile than Volkswagen AG Non Vtg. It trades about 0.06 of its total potential returns per unit of risk. Volkswagen AG Non Vtg is currently generating about 0.38 per unit of volatility. If you would invest 8,845 in Volkswagen AG Non Vtg on October 28, 2024 and sell it today you would earn a total of 814.00 from holding Volkswagen AG Non Vtg or generate 9.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SMA Solar Technology vs. Volkswagen AG Non Vtg
Performance |
| Timeline |
| SMA Solar Technology |
| Volkswagen AG Non |
SMA Solar and Volkswagen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SMA Solar and Volkswagen
The main advantage of trading using opposite SMA Solar and Volkswagen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SMA Solar position performs unexpectedly, Volkswagen 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 Volkswagen will offset losses from the drop in Volkswagen's long position.| SMA Solar vs. Roadside Real Estate | SMA Solar vs. Wyndham Hotels Resorts | SMA Solar vs. Gaztransport et Technigaz | SMA Solar vs. Take Two Interactive Software |
| Volkswagen vs. Anglo Asian Mining | Volkswagen vs. Coeur Mining | Volkswagen vs. Advanced Medical Solutions | Volkswagen vs. Bisichi Mining 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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