Correlation Between SMA Solar and Herald Investment
Can any of the company-specific risk be diversified away by investing in both SMA Solar and Herald Investment 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 Herald Investment 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 Herald Investment Trust, you can compare the effects of market volatilities on SMA Solar and Herald Investment 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 Herald Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of SMA Solar and Herald Investment.
Diversification Opportunities for SMA Solar and Herald Investment
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between SMA and Herald is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding SMA Solar Technology and Herald Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herald Investment Trust 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 Herald Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Herald Investment Trust has no effect on the direction of SMA Solar i.e., SMA Solar and Herald Investment go up and down completely randomly.
Pair Corralation between SMA Solar and Herald Investment
Assuming the 90 days trading horizon SMA Solar Technology is expected to generate 3.29 times more return on investment than Herald Investment. However, SMA Solar is 3.29 times more volatile than Herald Investment Trust. It trades about 0.02 of its potential returns per unit of risk. Herald Investment Trust is currently generating about 0.07 per unit of risk. If you would invest 1,490 in SMA Solar Technology on October 11, 2024 and sell it today you would earn a total of 5.00 from holding SMA Solar Technology or generate 0.34% 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. Herald Investment Trust
Performance |
| Timeline |
| SMA Solar Technology |
| Herald Investment Trust |
SMA Solar and Herald Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SMA Solar and Herald Investment
The main advantage of trading using opposite SMA Solar and Herald Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SMA Solar position performs unexpectedly, Herald Investment 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 Herald Investment will offset losses from the drop in Herald Investment's long position.| SMA Solar vs. Synthomer plc | SMA Solar vs. Flow Traders NV | SMA Solar vs. Cellnex Telecom SA | SMA Solar vs. Morgan Advanced Materials |
| Herald Investment vs. Cizzle Biotechnology Holdings | Herald Investment vs. Arrow Electronics | Herald Investment vs. SMA Solar Technology | Herald Investment vs. Darden Restaurants |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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