Correlation Between SMA Solar and First
Can any of the company-specific risk be diversified away by investing in both SMA Solar and First 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 First 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 First Class Metals, you can compare the effects of market volatilities on SMA Solar and First 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 First. Check out your portfolio center. Please also check ongoing floating volatility patterns of SMA Solar and First.
Diversification Opportunities for SMA Solar and First
Pay attention - limited upside
The 3 months correlation between SMA and First is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding SMA Solar Technology and First Class Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Class Metals 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 First. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Class Metals has no effect on the direction of SMA Solar i.e., SMA Solar and First go up and down completely randomly.
Pair Corralation between SMA Solar and First
Assuming the 90 days trading horizon SMA Solar Technology is expected to generate 1.11 times more return on investment than First. However, SMA Solar is 1.11 times more volatile than First Class Metals. It trades about 0.03 of its potential returns per unit of risk. First Class Metals is currently generating about -0.19 per unit of risk. If you would invest 1,352 in SMA Solar Technology on October 30, 2024 and sell it today you would earn a total of 29.00 from holding SMA Solar Technology or generate 2.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SMA Solar Technology vs. First Class Metals
Performance |
| Timeline |
| SMA Solar Technology |
| First Class Metals |
SMA Solar and First Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SMA Solar and First
The main advantage of trading using opposite SMA Solar and First positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SMA Solar position performs unexpectedly, First 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 First will offset losses from the drop in First's long position.| SMA Solar vs. Wyndham Hotels Resorts | SMA Solar vs. Fevertree Drinks Plc | SMA Solar vs. Ondine Biomedical | SMA Solar vs. National Beverage Corp |
| First vs. MediaZest plc | First vs. AcadeMedia AB | First vs. Centaur Media | First vs. Southwest Airlines Co |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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