Correlation Between SMA Solar and TBC Bank

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

Diversification Opportunities for SMA Solar and TBC Bank

-0.68

Correlation Coefficient

SMA Solar  TBC Bank

Excellent diversification

The 3 months correlation between SMA and TBC is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding SMA Solar Technology and TBC Bank Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TBC Bank Group 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 TBC Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TBC Bank Group has no effect on the direction of SMA Solar i.e., SMA Solar and TBC Bank go up and down completely randomly.

Pair Corralation between SMA Solar and TBC Bank

Assuming the 90 days trading horizon SMA Solar Technology is expected to generate 2.38 times more return on investment than TBC Bank. However, SMA Solar is 2.38 times more volatile than TBC Bank Group. It trades about 0.06 of its potential returns per unit of risk. TBC Bank Group is currently generating about 0.0 per unit of risk. If you would invest  1,395  in SMA Solar Technology on October 25, 2024 and sell it today you would earn a total of  44.00  from holding SMA Solar Technology or generate 3.15% return on investment over 90 days.

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

SMA Solar Technology  vs.  TBC Bank Group

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 latest unsteady 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.

TBC Bank Group

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TBC Bank Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, TBC Bank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with SMA Solar and TBC Bank

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

The idea behind SMA Solar Technology and TBC Bank Group 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..