Correlation Between SMA Solar and JAPAN TOBACCO
Can any of the company-specific risk be diversified away by investing in both SMA Solar and JAPAN TOBACCO 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 JAPAN TOBACCO 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 JAPAN TOBACCO UNSPADR12, you can compare the effects of market volatilities on SMA Solar and JAPAN TOBACCO 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 JAPAN TOBACCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of SMA Solar and JAPAN TOBACCO.
Diversification Opportunities for SMA Solar and JAPAN TOBACCO
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between SMA and JAPAN is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding SMA Solar Technology and JAPAN TOBACCO UNSPADR12 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JAPAN TOBACCO UNSPADR12 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 JAPAN TOBACCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JAPAN TOBACCO UNSPADR12 has no effect on the direction of SMA Solar i.e., SMA Solar and JAPAN TOBACCO go up and down completely randomly.
Pair Corralation between SMA Solar and JAPAN TOBACCO
Assuming the 90 days horizon SMA Solar Technology is expected to under-perform the JAPAN TOBACCO. In addition to that, SMA Solar is 2.35 times more volatile than JAPAN TOBACCO UNSPADR12. It trades about -0.06 of its total potential returns per unit of risk. JAPAN TOBACCO UNSPADR12 is currently generating about 0.05 per unit of volatility. If you would invest 820.00 in JAPAN TOBACCO UNSPADR12 on October 11, 2024 and sell it today you would earn a total of 350.00 from holding JAPAN TOBACCO UNSPADR12 or generate 42.68% 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. JAPAN TOBACCO UNSPADR12
Performance |
| Timeline |
| SMA Solar Technology |
| JAPAN TOBACCO UNSPADR12 |
SMA Solar and JAPAN TOBACCO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SMA Solar and JAPAN TOBACCO
The main advantage of trading using opposite SMA Solar and JAPAN TOBACCO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SMA Solar position performs unexpectedly, JAPAN TOBACCO 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 JAPAN TOBACCO will offset losses from the drop in JAPAN TOBACCO's long position.| SMA Solar vs. De Grey Mining | SMA Solar vs. Austevoll Seafood ASA | SMA Solar vs. Yanzhou Coal Mining | SMA Solar vs. Ebro Foods SA |
| JAPAN TOBACCO vs. Zoom Video Communications | JAPAN TOBACCO vs. 24SEVENOFFICE GROUP AB | JAPAN TOBACCO vs. Kingdee International Software | JAPAN TOBACCO vs. GEAR4MUSIC LS 10 |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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