Correlation Between European Metals and SMA Solar
Can any of the company-specific risk be diversified away by investing in both European Metals 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 European Metals and SMA Solar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between European Metals Holdings and SMA Solar Technology, you can compare the effects of market volatilities on European Metals 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 European Metals with a short position of SMA Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Metals and SMA Solar.
Diversification Opportunities for European Metals and SMA Solar
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between European and SMA is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding European Metals Holdings 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 European Metals 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 European Metals Holdings 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 European Metals i.e., European Metals and SMA Solar go up and down completely randomly.
Pair Corralation between European Metals and SMA Solar
Assuming the 90 days trading horizon European Metals is expected to generate 6.03 times less return on investment than SMA Solar. But when comparing it to its historical volatility, European Metals Holdings is 1.2 times less risky than SMA Solar. It trades about 0.01 of its potential returns per unit of risk. SMA Solar Technology is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 1,352 in SMA Solar Technology on October 30, 2024 and sell it today you would earn a total of 29.00 from holding SMA Solar Technology or generate 2.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
European Metals Holdings vs. SMA Solar Technology
Performance |
| Timeline |
| European Metals Holdings |
| SMA Solar Technology |
European Metals and SMA Solar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with European Metals and SMA Solar
The main advantage of trading using opposite European Metals and SMA Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Metals 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.| European Metals vs. Ebro Foods | European Metals vs. Zoom Video Communications | European Metals vs. Hilton Food Group | European Metals vs. Vienna Insurance Group |
| SMA Solar vs. Wyndham Hotels Resorts | SMA Solar vs. Fevertree Drinks Plc | SMA Solar vs. Ondine Biomedical | SMA Solar vs. National Beverage Corp |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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