Correlation Between SMA Solar and Karoon Energy
Can any of the company-specific risk be diversified away by investing in both SMA Solar and Karoon Energy 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 Karoon Energy 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 Karoon Energy, you can compare the effects of market volatilities on SMA Solar and Karoon Energy 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 Karoon Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of SMA Solar and Karoon Energy.
Diversification Opportunities for SMA Solar and Karoon Energy
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SMA and Karoon is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding SMA Solar Technology and Karoon Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Karoon Energy 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 Karoon Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Karoon Energy has no effect on the direction of SMA Solar i.e., SMA Solar and Karoon Energy go up and down completely randomly.
Pair Corralation between SMA Solar and Karoon Energy
Assuming the 90 days horizon SMA Solar Technology is expected to generate 2.26 times more return on investment than Karoon Energy. However, SMA Solar is 2.26 times more volatile than Karoon Energy. It trades about 0.11 of its potential returns per unit of risk. Karoon Energy is currently generating about 0.01 per unit of risk. If you would invest 1,366 in SMA Solar Technology on September 13, 2024 and sell it today you would earn a total of 144.00 from holding SMA Solar Technology or generate 10.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
SMA Solar Technology vs. Karoon Energy
Performance |
| Timeline |
| SMA Solar Technology |
| Karoon Energy |
SMA Solar and Karoon Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SMA Solar and Karoon Energy
The main advantage of trading using opposite SMA Solar and Karoon Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SMA Solar position performs unexpectedly, Karoon Energy 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 Karoon Energy will offset losses from the drop in Karoon Energy's long position.| SMA Solar vs. Hochschild Mining plc | SMA Solar vs. CI GAMES SA | SMA Solar vs. GAMESTOP | SMA Solar vs. International Game Technology |
| Karoon Energy vs. Chongqing Machinery Electric | Karoon Energy vs. HANOVER INSURANCE | Karoon Energy vs. REVO INSURANCE SPA | Karoon Energy vs. Insurance Australia Group |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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