Correlation Between SPORT LISBOA and SMA Solar
Can any of the company-specific risk be diversified away by investing in both SPORT LISBOA 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 SPORT LISBOA and SMA Solar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPORT LISBOA E and SMA Solar Technology, you can compare the effects of market volatilities on SPORT LISBOA 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 SPORT LISBOA with a short position of SMA Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPORT LISBOA and SMA Solar.
Diversification Opportunities for SPORT LISBOA and SMA Solar
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between SPORT and SMA is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding SPORT LISBOA E 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 SPORT LISBOA 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 SPORT LISBOA E 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 SPORT LISBOA i.e., SPORT LISBOA and SMA Solar go up and down completely randomly.
Pair Corralation between SPORT LISBOA and SMA Solar
Assuming the 90 days horizon SPORT LISBOA E is expected to generate 0.38 times more return on investment than SMA Solar. However, SPORT LISBOA E is 2.61 times less risky than SMA Solar. It trades about 0.16 of its potential returns per unit of risk. SMA Solar Technology is currently generating about -0.1 per unit of risk. If you would invest 314.00 in SPORT LISBOA E on September 3, 2024 and sell it today you would earn a total of 22.00 from holding SPORT LISBOA E or generate 7.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPORT LISBOA E vs. SMA Solar Technology
Performance |
| Timeline |
| SPORT LISBOA E |
| SMA Solar Technology |
SPORT LISBOA and SMA Solar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPORT LISBOA and SMA Solar
The main advantage of trading using opposite SPORT LISBOA and SMA Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPORT LISBOA 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 SPORT LISBOA E 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. SPORT LISBOA E | SMA Solar vs. Fukuyama Transporting Co | SMA Solar vs. Cardinal Health | SMA Solar vs. NTG Nordic Transport |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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