Correlation Between Visa and SMA Solar
Can any of the company-specific risk be diversified away by investing in both Visa 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 Visa and SMA Solar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and SMA Solar Technology, you can compare the effects of market volatilities on Visa 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 Visa with a short position of SMA Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and SMA Solar.
Diversification Opportunities for Visa and SMA Solar
Modest diversification
The 3 months correlation between Visa and SMA is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A 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 Visa 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 Visa Class A 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 Visa i.e., Visa and SMA Solar go up and down completely randomly.
Pair Corralation between Visa and SMA Solar
Taking into account the 90-day investment horizon Visa is expected to generate 3.25 times less return on investment than SMA Solar. But when comparing it to its historical volatility, Visa Class A is 5.13 times less risky than SMA Solar. It trades about 0.26 of its potential returns per unit of risk. SMA Solar Technology is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 1,364 in SMA Solar Technology on November 27, 2024 and sell it today you would earn a total of 189.00 from holding SMA Solar Technology or generate 13.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Visa Class A vs. SMA Solar Technology
Performance |
| Timeline |
| Visa Class A |
| SMA Solar Technology |
Visa and SMA Solar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and SMA Solar
The main advantage of trading using opposite Visa and SMA Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| SMA Solar vs. Martin Marietta Materials | SMA Solar vs. Plastic Omnium | SMA Solar vs. The Yokohama Rubber | SMA Solar vs. Sanyo Chemical Industries |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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