Correlation Between New Perspective and SMA Solar
Can any of the company-specific risk be diversified away by investing in both New Perspective 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 New Perspective and SMA Solar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Perspective Fund and SMA Solar Technology, you can compare the effects of market volatilities on New Perspective 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 New Perspective with a short position of SMA Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Perspective and SMA Solar.
Diversification Opportunities for New Perspective and SMA Solar
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between New and SMA is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding New Perspective Fund 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 New Perspective 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 New Perspective Fund 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 New Perspective i.e., New Perspective and SMA Solar go up and down completely randomly.
Pair Corralation between New Perspective and SMA Solar
Assuming the 90 days horizon New Perspective is expected to generate 6.01 times less return on investment than SMA Solar. But when comparing it to its historical volatility, New Perspective Fund is 6.06 times less risky than SMA Solar. It trades about 0.14 of its potential returns per unit of risk. 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 |
New Perspective Fund vs. SMA Solar Technology
Performance |
| Timeline |
| New Perspective |
| SMA Solar Technology |
New Perspective and SMA Solar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Perspective and SMA Solar
The main advantage of trading using opposite New Perspective and SMA Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Perspective 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.| New Perspective vs. Growth Fund Of | New Perspective vs. American Funds Fundamental | New Perspective vs. Investment Of America | New Perspective vs. Smallcap World Fund |
| 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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