Correlation Between Apple and SMA Solar
Can any of the company-specific risk be diversified away by investing in both Apple and SMA Solar 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 Apple and SMA Solar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and SMA Solar Technology, you can compare the effects of market volatilities on Apple and SMA Solar 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 Apple with a short position of SMA Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and SMA Solar.
Diversification Opportunities for Apple and SMA Solar
Good diversification
The 3 months correlation between Apple and SMA is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and SMA Solar Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMA Solar Technology and Apple 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 Apple Inc are associated (or correlated) with SMA Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMA Solar Technology has no effect on the direction of Apple i.e., Apple and SMA Solar go up and down completely randomly.
Pair Corralation between Apple and SMA Solar
Given the investment horizon of 90 days Apple Inc is expected to under-perform the SMA Solar. But the stock apears to be less risky and, when comparing its historical volatility, Apple Inc is 3.48 times less risky than SMA Solar. The stock trades about -0.39 of its potential returns per unit of risk. The SMA Solar Technology is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1,446 in SMA Solar Technology on October 24, 2024 and sell it today you would earn a total of 160.00 from holding SMA Solar Technology or generate 11.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Apple Inc vs. SMA Solar Technology
Performance |
| Timeline |
| Apple Inc |
| SMA Solar Technology |
Apple and SMA Solar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and SMA Solar
The main advantage of trading using opposite Apple and SMA Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, SMA Solar 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 SMA Solar will offset losses from the drop in SMA Solar's long position.The idea behind Apple Inc and SMA Solar Technology pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| SMA Solar vs. Xinyi Solar Holdings | SMA Solar vs. Xinyi Solar Holdings | SMA Solar vs. Sunrun Inc | SMA Solar vs. SMA Solar Technology |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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