Correlation Between Three Sixty and SMA Solar
Can any of the company-specific risk be diversified away by investing in both Three Sixty 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 Three Sixty and SMA Solar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Three Sixty Solar and SMA Solar Technology, you can compare the effects of market volatilities on Three Sixty 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 Three Sixty with a short position of SMA Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Three Sixty and SMA Solar.
Diversification Opportunities for Three Sixty and SMA Solar
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Three and SMA is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Three Sixty Solar 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 Three Sixty 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 Three Sixty Solar 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 Three Sixty i.e., Three Sixty and SMA Solar go up and down completely randomly.
Pair Corralation between Three Sixty and SMA Solar
Assuming the 90 days horizon Three Sixty Solar is expected to under-perform the SMA Solar. In addition to that, Three Sixty is 7.62 times more volatile than SMA Solar Technology. It trades about -0.25 of its total potential returns per unit of risk. SMA Solar Technology is currently generating about -0.38 per unit of volatility. If you would invest 181.00 in SMA Solar Technology on August 28, 2024 and sell it today you would lose (56.00) from holding SMA Solar Technology or give up 30.94% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Three Sixty Solar vs. SMA Solar Technology
Performance |
| Timeline |
| Three Sixty Solar |
| SMA Solar Technology |
Three Sixty and SMA Solar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Three Sixty and SMA Solar
The main advantage of trading using opposite Three Sixty and SMA Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Three Sixty 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.The idea behind Three Sixty Solar and SMA Solar Technology pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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