Correlation Between Shoals Technologies and SMA Solar
Can any of the company-specific risk be diversified away by investing in both Shoals Technologies 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 Shoals Technologies and SMA Solar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shoals Technologies Group and SMA Solar Technology, you can compare the effects of market volatilities on Shoals Technologies 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 Shoals Technologies with a short position of SMA Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shoals Technologies and SMA Solar.
Diversification Opportunities for Shoals Technologies and SMA Solar
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Shoals and SMA is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Shoals Technologies Group 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 Shoals Technologies 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 Shoals Technologies Group 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 Shoals Technologies i.e., Shoals Technologies and SMA Solar go up and down completely randomly.
Pair Corralation between Shoals Technologies and SMA Solar
Given the investment horizon of 90 days Shoals Technologies Group is expected to generate 1.43 times more return on investment than SMA Solar. However, Shoals Technologies is 1.43 times more volatile than SMA Solar Technology. It trades about -0.01 of its potential returns per unit of risk. SMA Solar Technology is currently generating about -0.38 per unit of risk. If you would invest 536.00 in Shoals Technologies Group on August 28, 2024 and sell it today you would lose (29.00) from holding Shoals Technologies Group or give up 5.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shoals Technologies Group vs. SMA Solar Technology
Performance |
| Timeline |
| Shoals Technologies |
| SMA Solar Technology |
Shoals Technologies and SMA Solar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shoals Technologies and SMA Solar
The main advantage of trading using opposite Shoals Technologies and SMA Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shoals Technologies 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.| Shoals Technologies vs. 1847 Holdings LLC | Shoals Technologies vs. Westport Fuel Systems | Shoals Technologies vs. Falcons Beyond Global, | Shoals Technologies vs. Brookfield Business Partners |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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