Correlation Between SMA Solar and Commercial Vehicle
Can any of the company-specific risk be diversified away by investing in both SMA Solar and Commercial Vehicle 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 Commercial Vehicle 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 Commercial Vehicle Group, you can compare the effects of market volatilities on SMA Solar and Commercial Vehicle 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 Commercial Vehicle. Check out your portfolio center. Please also check ongoing floating volatility patterns of SMA Solar and Commercial Vehicle.
Diversification Opportunities for SMA Solar and Commercial Vehicle
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between SMA and Commercial is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding SMA Solar Technology and Commercial Vehicle Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commercial Vehicle 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 Commercial Vehicle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commercial Vehicle has no effect on the direction of SMA Solar i.e., SMA Solar and Commercial Vehicle go up and down completely randomly.
Pair Corralation between SMA Solar and Commercial Vehicle
Assuming the 90 days horizon SMA Solar Technology is expected to generate 1.1 times more return on investment than Commercial Vehicle. However, SMA Solar is 1.1 times more volatile than Commercial Vehicle Group. It trades about -0.09 of its potential returns per unit of risk. Commercial Vehicle Group is currently generating about -0.18 per unit of risk. If you would invest 1,500 in SMA Solar Technology on November 3, 2024 and sell it today you would lose (104.00) from holding SMA Solar Technology or give up 6.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SMA Solar Technology vs. Commercial Vehicle Group
Performance |
| Timeline |
| SMA Solar Technology |
| Commercial Vehicle |
SMA Solar and Commercial Vehicle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SMA Solar and Commercial Vehicle
The main advantage of trading using opposite SMA Solar and Commercial Vehicle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SMA Solar position performs unexpectedly, Commercial Vehicle 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 Commercial Vehicle will offset losses from the drop in Commercial Vehicle's long position.| SMA Solar vs. UNIVMUSIC GRPADR050 | SMA Solar vs. Planet Fitness | SMA Solar vs. SHIP HEALTHCARE HLDGINC | SMA Solar vs. CarsalesCom |
| Commercial Vehicle vs. Nomad Foods | Commercial Vehicle vs. CAL MAINE FOODS | Commercial Vehicle vs. Molson Coors Beverage | Commercial Vehicle vs. Tyson Foods |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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