Correlation Between SMA Solar and Metals Exploration
Can any of the company-specific risk be diversified away by investing in both SMA Solar and Metals Exploration 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 Metals Exploration 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 Metals Exploration Plc, you can compare the effects of market volatilities on SMA Solar and Metals Exploration 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 Metals Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of SMA Solar and Metals Exploration.
Diversification Opportunities for SMA Solar and Metals Exploration
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between SMA and Metals is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding SMA Solar Technology and Metals Exploration Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metals Exploration Plc 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 Metals Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metals Exploration Plc has no effect on the direction of SMA Solar i.e., SMA Solar and Metals Exploration go up and down completely randomly.
Pair Corralation between SMA Solar and Metals Exploration
Assuming the 90 days trading horizon SMA Solar Technology is expected to generate 0.95 times more return on investment than Metals Exploration. However, SMA Solar Technology is 1.06 times less risky than Metals Exploration. It trades about -0.17 of its potential returns per unit of risk. Metals Exploration Plc is currently generating about -0.2 per unit of risk. If you would invest 1,587 in SMA Solar Technology on November 7, 2024 and sell it today you would lose (237.00) from holding SMA Solar Technology or give up 14.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 91.3% |
| Values | Daily Returns |
SMA Solar Technology vs. Metals Exploration Plc
Performance |
| Timeline |
| SMA Solar Technology |
| Metals Exploration Plc |
SMA Solar and Metals Exploration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SMA Solar and Metals Exploration
The main advantage of trading using opposite SMA Solar and Metals Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SMA Solar position performs unexpectedly, Metals Exploration 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 Metals Exploration will offset losses from the drop in Metals Exploration's long position.| SMA Solar vs. URU Metals | SMA Solar vs. Universal Display Corp | SMA Solar vs. Melia Hotels | SMA Solar vs. Dalata Hotel Group |
| Metals Exploration vs. Prosiebensat 1 Media | Metals Exploration vs. Zegona Communications Plc | Metals Exploration vs. Verizon Communications | Metals Exploration vs. Hollywood Bowl Group |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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