Correlation Between Cross Country and SMA Solar
Can any of the company-specific risk be diversified away by investing in both Cross Country 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 Cross Country and SMA Solar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cross Country Healthcare and SMA Solar Technology, you can compare the effects of market volatilities on Cross Country 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 Cross Country with a short position of SMA Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cross Country and SMA Solar.
Diversification Opportunities for Cross Country and SMA Solar
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Cross and SMA is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Cross Country Healthcare 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 Cross Country 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 Cross Country Healthcare 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 Cross Country i.e., Cross Country and SMA Solar go up and down completely randomly.
Pair Corralation between Cross Country and SMA Solar
Assuming the 90 days horizon Cross Country Healthcare is expected to generate 0.77 times more return on investment than SMA Solar. However, Cross Country Healthcare is 1.3 times less risky than SMA Solar. It trades about -0.03 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 1,300 in Cross Country Healthcare on September 3, 2024 and sell it today you would lose (220.00) from holding Cross Country Healthcare or give up 16.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cross Country Healthcare vs. SMA Solar Technology
Performance |
| Timeline |
| Cross Country Healthcare |
| SMA Solar Technology |
Cross Country and SMA Solar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cross Country and SMA Solar
The main advantage of trading using opposite Cross Country and SMA Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cross Country 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.| Cross Country vs. ALTAIR RES INC | Cross Country vs. SEKISUI CHEMICAL | Cross Country vs. WESTLAKE CHEMICAL | Cross Country vs. Mitsubishi Gas Chemical |
| SMA Solar vs. Superior Plus Corp | SMA Solar vs. NMI Holdings | SMA Solar vs. Origin Agritech | SMA Solar vs. SIVERS SEMICONDUCTORS AB |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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