Correlation Between Vodafone Group and SMA Solar

Can any of the company-specific risk be diversified away by investing in both Vodafone Group 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 Vodafone Group and SMA Solar into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vodafone Group PLC and SMA Solar Technology, you can compare the effects of market volatilities on Vodafone Group 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 Vodafone Group with a short position of SMA Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vodafone Group and SMA Solar.

Diversification Opportunities for Vodafone Group and SMA Solar

-0.39

Correlation Coefficient

Vodafone Group  SMA Solar

Very good diversification

The 3 months correlation between Vodafone and SMA is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Vodafone Group PLC 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 Vodafone Group 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 Vodafone Group PLC 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 Vodafone Group i.e., Vodafone Group and SMA Solar go up and down completely randomly.

Pair Corralation between Vodafone Group and SMA Solar

Assuming the 90 days trading horizon Vodafone Group PLC is expected to generate 0.43 times more return on investment than SMA Solar. However, Vodafone Group PLC is 2.32 times less risky than SMA Solar. It trades about 0.0 of its potential returns per unit of risk. SMA Solar Technology is currently generating about -0.13 per unit of risk. If you would invest  902.00  in Vodafone Group PLC on December 2, 2024 and sell it today you would lose (20.00) from holding Vodafone Group PLC or give up 2.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.81%
Values	Daily Returns

Vodafone Group PLC  vs.  SMA Solar Technology

Vodafone Group PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vodafone Group PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Vodafone Group is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

SMA Solar Technology

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SMA Solar Technology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, SMA Solar unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vodafone Group and SMA Solar

The main advantage of trading using opposite Vodafone Group and SMA Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vodafone Group 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 Vodafone Group PLC 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.

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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.