Correlation Between SMA Solar and CHINA SHENHUA
Can any of the company-specific risk be diversified away by investing in both SMA Solar and CHINA SHENHUA 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 CHINA SHENHUA 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 CHINA SHENHUA ENA, you can compare the effects of market volatilities on SMA Solar and CHINA SHENHUA 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 CHINA SHENHUA. Check out your portfolio center. Please also check ongoing floating volatility patterns of SMA Solar and CHINA SHENHUA.
Diversification Opportunities for SMA Solar and CHINA SHENHUA
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between SMA and CHINA is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding SMA Solar Technology and CHINA SHENHUA ENA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA SHENHUA ENA 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 CHINA SHENHUA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA SHENHUA ENA has no effect on the direction of SMA Solar i.e., SMA Solar and CHINA SHENHUA go up and down completely randomly.
Pair Corralation between SMA Solar and CHINA SHENHUA
Assuming the 90 days horizon SMA Solar Technology is expected to under-perform the CHINA SHENHUA. In addition to that, SMA Solar is 1.47 times more volatile than CHINA SHENHUA ENA. It trades about -0.14 of its total potential returns per unit of risk. CHINA SHENHUA ENA is currently generating about 0.07 per unit of volatility. If you would invest 1,037 in CHINA SHENHUA ENA on September 4, 2024 and sell it today you would earn a total of 493.00 from holding CHINA SHENHUA ENA or generate 47.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SMA Solar Technology vs. CHINA SHENHUA ENA
Performance |
| Timeline |
| SMA Solar Technology |
| CHINA SHENHUA ENA |
SMA Solar and CHINA SHENHUA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SMA Solar and CHINA SHENHUA
The main advantage of trading using opposite SMA Solar and CHINA SHENHUA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SMA Solar position performs unexpectedly, CHINA SHENHUA 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 CHINA SHENHUA will offset losses from the drop in CHINA SHENHUA's long position.| SMA Solar vs. Hyatt Hotels | SMA Solar vs. Meli Hotels International | SMA Solar vs. Xenia Hotels Resorts | SMA Solar vs. ANTA SPORTS PRODUCT |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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