Correlation Between SMA Solar and Roper Technologies

Can any of the company-specific risk be diversified away by investing in both SMA Solar and Roper 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 Roper 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 Roper Technologies, you can compare the effects of market volatilities on SMA Solar and Roper 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 Roper Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of SMA Solar and Roper Technologies.

Diversification Opportunities for SMA Solar and Roper Technologies

-0.22

Correlation Coefficient

SMA Solar  Roper Technologies

Very good diversification

The 3 months correlation between SMA and Roper is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding SMA Solar Technology and Roper Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roper 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 Roper Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roper Technologies has no effect on the direction of SMA Solar i.e., SMA Solar and Roper Technologies go up and down completely randomly.

Pair Corralation between SMA Solar and Roper Technologies

Assuming the 90 days trading horizon SMA Solar Technology is expected to generate 6.08 times more return on investment than Roper Technologies. However, SMA Solar is 6.08 times more volatile than Roper Technologies. It trades about 0.05 of its potential returns per unit of risk. Roper Technologies is currently generating about -0.55 per unit of risk. If you would invest  1,490  in SMA Solar Technology on October 11, 2024 and sell it today you would earn a total of  33.00  from holding SMA Solar Technology or generate 2.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

SMA Solar Technology  vs.  Roper Technologies

SMA Solar Technology

Risk-Adjusted Performance

0 of 100

Very Weak

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

Roper Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Roper Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with SMA Solar and Roper Technologies

The main advantage of trading using opposite SMA Solar and Roper Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SMA Solar position performs unexpectedly, Roper 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 Roper Technologies will offset losses from the drop in Roper Technologies' long position.

The idea behind SMA Solar Technology and Roper Technologies 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.