Correlation Between Amazon and SMA Solar
Can any of the company-specific risk be diversified away by investing in both Amazon 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 Amazon and SMA Solar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and SMA Solar Technology, you can compare the effects of market volatilities on Amazon 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 Amazon with a short position of SMA Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and SMA Solar.
Diversification Opportunities for Amazon and SMA Solar
Pay attention - limited upside
The 3 months correlation between Amazon and SMA is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Amazon 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 Amazon 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 Amazon 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 Amazon i.e., Amazon and SMA Solar go up and down completely randomly.
Pair Corralation between Amazon and SMA Solar
Assuming the 90 days trading horizon Amazon Inc is expected to generate 0.63 times more return on investment than SMA Solar. However, Amazon Inc is 1.6 times less risky than SMA Solar. It trades about 0.17 of its potential returns per unit of risk. SMA Solar Technology is currently generating about -0.42 per unit of risk. If you would invest 17,510 in Amazon Inc on August 27, 2024 and sell it today you would earn a total of 1,490 from holding Amazon Inc or generate 8.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amazon Inc vs. SMA Solar Technology
Performance |
| Timeline |
| Amazon Inc |
| SMA Solar Technology |
Amazon and SMA Solar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and SMA Solar
The main advantage of trading using opposite Amazon and SMA Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon 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 Amazon 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. Superior Plus Corp | SMA Solar vs. Origin Agritech | SMA Solar vs. Identiv | SMA Solar vs. INTUITIVE SURGICAL |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
Other Complementary Tools
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios |