Correlation Between SMA Solar and Seche Environnement

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

Diversification Opportunities for SMA Solar and Seche Environnement

0.56

Correlation Coefficient

SMA Solar  Seche Environnement

Very weak diversification

The 3 months correlation between SMA and Seche is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding SMA Solar Technology and Seche Environnement SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seche Environnement 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 Seche Environnement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seche Environnement has no effect on the direction of SMA Solar i.e., SMA Solar and Seche Environnement go up and down completely randomly.

Pair Corralation between SMA Solar and Seche Environnement

Assuming the 90 days trading horizon SMA Solar Technology is expected to generate 1.81 times more return on investment than Seche Environnement. However, SMA Solar is 1.81 times more volatile than Seche Environnement SA. It trades about 0.13 of its potential returns per unit of risk. Seche Environnement SA is currently generating about -0.13 per unit of risk. If you would invest  1,219  in SMA Solar Technology on September 21, 2024 and sell it today you would earn a total of  129.00  from holding SMA Solar Technology or generate 10.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

SMA Solar Technology  vs.  Seche Environnement SA

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Seche Environnement

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seche Environnement SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with SMA Solar and Seche Environnement

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

The idea behind SMA Solar Technology and Seche Environnement SA 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..