Correlation Between SMA Solar and SolarEdge Technologies
Can any of the company-specific risk be diversified away by investing in both SMA Solar and SolarEdge Technologies 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 SolarEdge Technologies 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 SolarEdge Technologies, you can compare the effects of market volatilities on SMA Solar and SolarEdge Technologies 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 SolarEdge Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of SMA Solar and SolarEdge Technologies.
Diversification Opportunities for SMA Solar and SolarEdge Technologies
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SMA and SolarEdge is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding SMA Solar Technology and SolarEdge Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SolarEdge Technologies 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 SolarEdge Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SolarEdge Technologies has no effect on the direction of SMA Solar i.e., SMA Solar and SolarEdge Technologies go up and down completely randomly.
Pair Corralation between SMA Solar and SolarEdge Technologies
Assuming the 90 days horizon SMA Solar Technology is expected to generate 0.99 times more return on investment than SolarEdge Technologies. However, SMA Solar Technology is 1.01 times less risky than SolarEdge Technologies. It trades about 0.05 of its potential returns per unit of risk. SolarEdge Technologies is currently generating about -0.12 per unit of risk. If you would invest 135.00 in SMA Solar Technology on November 4, 2024 and sell it today you would earn a total of 4.00 from holding SMA Solar Technology or generate 2.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
SMA Solar Technology vs. SolarEdge Technologies
Performance |
| Timeline |
| SMA Solar Technology |
| SolarEdge Technologies |
SMA Solar and SolarEdge Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SMA Solar and SolarEdge Technologies
The main advantage of trading using opposite SMA Solar and SolarEdge Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SMA Solar position performs unexpectedly, SolarEdge Technologies 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 SolarEdge Technologies will offset losses from the drop in SolarEdge Technologies' long position.| SMA Solar vs. Xinyi Solar Holdings | SMA Solar vs. Xinyi Solar Holdings | SMA Solar vs. SolarEdge Technologies | SMA Solar vs. Sunrun Inc |
| SolarEdge Technologies vs. First Solar | SolarEdge Technologies vs. Sunrun Inc | SolarEdge Technologies vs. Canadian Solar | SolarEdge Technologies vs. Enphase Energy |
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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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