Correlation Between SMA Solar and Hong Kong

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

Diversification Opportunities for SMA Solar and Hong Kong

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Correlation Coefficient

SMA Solar  Hong Kong

Pay attention - limited upside

The 3 months correlation between SMA and Hong is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding SMA Solar Technology and Hong Kong Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hong Kong Land 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 Hong Kong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hong Kong Land has no effect on the direction of SMA Solar i.e., SMA Solar and Hong Kong go up and down completely randomly.

Pair Corralation between SMA Solar and Hong Kong

Assuming the 90 days trading horizon SMA Solar Technology is expected to under-perform the Hong Kong. In addition to that, SMA Solar is 27.65 times more volatile than Hong Kong Land. It trades about -0.11 of its total potential returns per unit of risk. Hong Kong Land is currently generating about 0.07 per unit of volatility. If you would invest  719.00  in Hong Kong Land on September 12, 2024 and sell it today you would earn a total of  22.00  from holding Hong Kong Land or generate 3.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

SMA Solar Technology  vs.  Hong Kong Land

SMA Solar Technology

Risk-Adjusted Performance

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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.

Hong Kong Land

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with SMA Solar and Hong Kong

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

The idea behind SMA Solar Technology and Hong Kong Land 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.