Correlation Between Scottish American and SMA Solar
Can any of the company-specific risk be diversified away by investing in both Scottish American and SMA Solar 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 Scottish American and SMA Solar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Scottish American Investment and SMA Solar Technology, you can compare the effects of market volatilities on Scottish American and SMA Solar 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 Scottish American with a short position of SMA Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scottish American and SMA Solar.
Diversification Opportunities for Scottish American and SMA Solar
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Scottish and SMA is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Scottish American Investment and SMA Solar Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMA Solar Technology and Scottish American 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 Scottish American Investment are associated (or correlated) with SMA Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMA Solar Technology has no effect on the direction of Scottish American i.e., Scottish American and SMA Solar go up and down completely randomly.
Pair Corralation between Scottish American and SMA Solar
Assuming the 90 days trading horizon Scottish American Investment is expected to generate 0.18 times more return on investment than SMA Solar. However, Scottish American Investment is 5.57 times less risky than SMA Solar. It trades about 0.02 of its potential returns per unit of risk. SMA Solar Technology is currently generating about -0.21 per unit of risk. If you would invest 50,630 in Scottish American Investment on August 29, 2024 and sell it today you would earn a total of 170.00 from holding Scottish American Investment or generate 0.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Scottish American Investment vs. SMA Solar Technology
Performance |
| Timeline |
| Scottish American |
| SMA Solar Technology |
Scottish American and SMA Solar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Scottish American and SMA Solar
The main advantage of trading using opposite Scottish American and SMA Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scottish American position performs unexpectedly, SMA Solar 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 SMA Solar will offset losses from the drop in SMA Solar's long position.| Scottish American vs. Toyota Motor Corp | Scottish American vs. Lendinvest PLC | Scottish American vs. Neometals | Scottish American vs. Coor Service Management |
| SMA Solar vs. Lendinvest PLC | SMA Solar vs. Neometals | SMA Solar vs. Coor Service Management | SMA Solar vs. Albion Technology General |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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