Correlation Between SMA Solar and AM EAGLE
Can any of the company-specific risk be diversified away by investing in both SMA Solar and AM EAGLE 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 SMA Solar and AM EAGLE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SMA Solar Technology and AM EAGLE OUTFITTERS, you can compare the effects of market volatilities on SMA Solar and AM EAGLE 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 SMA Solar with a short position of AM EAGLE. Check out your portfolio center. Please also check ongoing floating volatility patterns of SMA Solar and AM EAGLE.
Diversification Opportunities for SMA Solar and AM EAGLE
Poor diversification
The 3 months correlation between SMA and AFG is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding SMA Solar Technology and AM EAGLE OUTFITTERS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AM EAGLE OUTFITTERS and SMA Solar 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 SMA Solar Technology are associated (or correlated) with AM EAGLE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AM EAGLE OUTFITTERS has no effect on the direction of SMA Solar i.e., SMA Solar and AM EAGLE go up and down completely randomly.
Pair Corralation between SMA Solar and AM EAGLE
Assuming the 90 days horizon SMA Solar Technology is expected to generate 1.13 times more return on investment than AM EAGLE. However, SMA Solar is 1.13 times more volatile than AM EAGLE OUTFITTERS. It trades about 0.11 of its potential returns per unit of risk. AM EAGLE OUTFITTERS is currently generating about -0.31 per unit of risk. If you would invest 1,336 in SMA Solar Technology on October 1, 2024 and sell it today you would earn a total of 83.00 from holding SMA Solar Technology or generate 6.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SMA Solar Technology vs. AM EAGLE OUTFITTERS
Performance |
| Timeline |
| SMA Solar Technology |
| AM EAGLE OUTFITTERS |
SMA Solar and AM EAGLE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SMA Solar and AM EAGLE
The main advantage of trading using opposite SMA Solar and AM EAGLE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SMA Solar position performs unexpectedly, AM EAGLE 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 AM EAGLE will offset losses from the drop in AM EAGLE's long position.| SMA Solar vs. First Solar | SMA Solar vs. Xinyi Solar Holdings | SMA Solar vs. Sunrun Inc | SMA Solar vs. SMA SOLAR T |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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