Correlation Between SMA Solar and Secure Property

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

Diversification Opportunities for SMA Solar and Secure Property

-0.05

Correlation Coefficient

SMA Solar  Secure Property

Good diversification

The 3 months correlation between SMA and Secure is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding SMA Solar Technology and Secure Property Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Secure Property Deve 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 Secure Property. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Secure Property Deve has no effect on the direction of SMA Solar i.e., SMA Solar and Secure Property go up and down completely randomly.

Pair Corralation between SMA Solar and Secure Property

Assuming the 90 days trading horizon SMA Solar Technology is expected to generate 2.88 times more return on investment than Secure Property. However, SMA Solar is 2.88 times more volatile than Secure Property Development. It trades about -0.01 of its potential returns per unit of risk. Secure Property Development is currently generating about -0.13 per unit of risk. If you would invest  1,598  in SMA Solar Technology on October 15, 2024 and sell it today you would lose (114.00) from holding SMA Solar Technology or give up 7.13% of portfolio value over 90 days.

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

SMA Solar Technology  vs.  Secure Property Development

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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Secure Property Deve

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Secure Property Development 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 Secure Property

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

The idea behind SMA Solar Technology and Secure Property Development 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.