Correlation Between SMA SOLAR and Safety Insurance
Can any of the company-specific risk be diversified away by investing in both SMA SOLAR and Safety Insurance 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 Safety Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SMA SOLAR T and Safety Insurance Group, you can compare the effects of market volatilities on SMA SOLAR and Safety Insurance 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 Safety Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of SMA SOLAR and Safety Insurance.
Diversification Opportunities for SMA SOLAR and Safety Insurance
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between SMA and Safety is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding SMA SOLAR T and Safety Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safety Insurance 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 T are associated (or correlated) with Safety Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safety Insurance has no effect on the direction of SMA SOLAR i.e., SMA SOLAR and Safety Insurance go up and down completely randomly.
Pair Corralation between SMA SOLAR and Safety Insurance
Assuming the 90 days horizon SMA SOLAR T is expected to under-perform the Safety Insurance. In addition to that, SMA SOLAR is 3.89 times more volatile than Safety Insurance Group. It trades about -0.05 of its total potential returns per unit of risk. Safety Insurance Group is currently generating about 0.02 per unit of volatility. If you would invest 7,153 in Safety Insurance Group on November 4, 2024 and sell it today you would earn a total of 347.00 from holding Safety Insurance Group or generate 4.85% 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 T vs. Safety Insurance Group
Performance |
| Timeline |
| SMA SOLAR T |
| Safety Insurance |
SMA SOLAR and Safety Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SMA SOLAR and Safety Insurance
The main advantage of trading using opposite SMA SOLAR and Safety Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SMA SOLAR position performs unexpectedly, Safety Insurance 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 Safety Insurance will offset losses from the drop in Safety Insurance's long position.| SMA SOLAR vs. First Solar | SMA SOLAR vs. SolarEdge Technologies | SMA SOLAR vs. Xinyi Solar Holdings | SMA SOLAR vs. Sunrun Inc |
| Safety Insurance vs. ALERION CLEANPOWER | Safety Insurance vs. Indutrade AB | Safety Insurance vs. Clean Energy Fuels | Safety Insurance vs. Titan Machinery |
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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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