Correlation Between Alphabet and SMA Solar
Can any of the company-specific risk be diversified away by investing in both Alphabet 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 Alphabet and SMA Solar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alphabet Inc Class C and SMA Solar Technology, you can compare the effects of market volatilities on Alphabet 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 Alphabet with a short position of SMA Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and SMA Solar.
Diversification Opportunities for Alphabet and SMA Solar
Excellent diversification
The 3 months correlation between Alphabet and SMA is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C 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 Alphabet 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 Alphabet Inc Class C 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 Alphabet i.e., Alphabet and SMA Solar go up and down completely randomly.
Pair Corralation between Alphabet and SMA Solar
Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 0.43 times more return on investment than SMA Solar. However, Alphabet Inc Class C is 2.33 times less risky than SMA Solar. It trades about 0.07 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 13,113 in Alphabet Inc Class C on September 1, 2024 and sell it today you would earn a total of 3,936 from holding Alphabet Inc Class C or generate 30.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 98.18% |
| Values | Daily Returns |
Alphabet Inc Class C vs. SMA Solar Technology
Performance |
| Timeline |
| Alphabet Class C |
| SMA Solar Technology |
Alphabet and SMA Solar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alphabet and SMA Solar
The main advantage of trading using opposite Alphabet and SMA Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet 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 Alphabet Inc Class C 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. 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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