Correlation Between SMA Solar and Highlight Communications
Can any of the company-specific risk be diversified away by investing in both SMA Solar and Highlight Communications 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 Highlight Communications 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 Highlight Communications AG, you can compare the effects of market volatilities on SMA Solar and Highlight Communications 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 Highlight Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of SMA Solar and Highlight Communications.
Diversification Opportunities for SMA Solar and Highlight Communications
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between SMA and Highlight is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding SMA Solar Technology and Highlight Communications AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highlight Communications 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 Highlight Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highlight Communications has no effect on the direction of SMA Solar i.e., SMA Solar and Highlight Communications go up and down completely randomly.
Pair Corralation between SMA Solar and Highlight Communications
Assuming the 90 days horizon SMA Solar is expected to generate 1.29 times less return on investment than Highlight Communications. In addition to that, SMA Solar is 2.32 times more volatile than Highlight Communications AG. It trades about 0.11 of its total potential returns per unit of risk. Highlight Communications AG is currently generating about 0.34 per unit of volatility. If you would invest 98.00 in Highlight Communications AG on September 13, 2024 and sell it today you would earn a total of 17.00 from holding Highlight Communications AG or generate 17.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SMA Solar Technology vs. Highlight Communications AG
Performance |
| Timeline |
| SMA Solar Technology |
| Highlight Communications |
SMA Solar and Highlight Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SMA Solar and Highlight Communications
The main advantage of trading using opposite SMA Solar and Highlight Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SMA Solar position performs unexpectedly, Highlight Communications 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 Highlight Communications will offset losses from the drop in Highlight Communications' long position.| SMA Solar vs. Hochschild Mining plc | SMA Solar vs. CI GAMES SA | SMA Solar vs. GAMESTOP | SMA Solar vs. International Game Technology |
| Highlight Communications vs. Solstad Offshore ASA | Highlight Communications vs. SBM OFFSHORE | Highlight Communications vs. Ares Management Corp | Highlight Communications vs. TOREX SEMICONDUCTOR LTD |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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