Correlation Between Empire State and SMA Solar
Can any of the company-specific risk be diversified away by investing in both Empire State 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 Empire State and SMA Solar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Empire State Realty and SMA Solar Technology, you can compare the effects of market volatilities on Empire State 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 Empire State with a short position of SMA Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empire State and SMA Solar.
Diversification Opportunities for Empire State and SMA Solar
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Empire and SMA is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Empire State Realty 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 Empire State 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 Empire State Realty 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 Empire State i.e., Empire State and SMA Solar go up and down completely randomly.
Pair Corralation between Empire State and SMA Solar
Given the investment horizon of 90 days Empire State Realty is expected to generate 0.45 times more return on investment than SMA Solar. However, Empire State Realty is 2.22 times less risky than SMA Solar. It trades about 0.06 of its potential returns per unit of risk. SMA Solar Technology is currently generating about -0.11 per unit of risk. If you would invest 871.00 in Empire State Realty on September 1, 2024 and sell it today you would earn a total of 225.00 from holding Empire State Realty or generate 25.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.18% |
| Values | Daily Returns |
Empire State Realty vs. SMA Solar Technology
Performance |
| Timeline |
| Empire State Realty |
| SMA Solar Technology |
Empire State and SMA Solar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Empire State and SMA Solar
The main advantage of trading using opposite Empire State and SMA Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empire State 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.| Empire State vs. Paramount Group | Empire State vs. Hudson Pacific Properties | Empire State vs. Equity Commonwealth | Empire State vs. Douglas Emmett |
| SMA Solar vs. Xinyi Solar Holdings | SMA Solar vs. Superior Plus Corp | SMA Solar vs. NMI Holdings | SMA Solar vs. Origin Agritech |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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