Correlation Between SMA Solar and URU Metals

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

Diversification Opportunities for SMA Solar and URU Metals

0.14

Correlation Coefficient

SMA Solar  URU Metals

Average diversification

The 3 months correlation between SMA and URU is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding SMA Solar Technology and URU Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on URU Metals 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 URU Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of URU Metals has no effect on the direction of SMA Solar i.e., SMA Solar and URU Metals go up and down completely randomly.

Pair Corralation between SMA Solar and URU Metals

Assuming the 90 days trading horizon SMA Solar is expected to generate 2.65 times less return on investment than URU Metals. In addition to that, SMA Solar is 1.21 times more volatile than URU Metals. It trades about 0.01 of its total potential returns per unit of risk. URU Metals is currently generating about 0.03 per unit of volatility. If you would invest  14,500  in URU Metals on October 24, 2024 and sell it today you would earn a total of  500.00  from holding URU Metals or generate 3.45% return on investment over 90 days.

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

SMA Solar Technology  vs.  URU Metals

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.

URU Metals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in URU Metals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, URU Metals may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with SMA Solar and URU Metals

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

The idea behind SMA Solar Technology and URU Metals 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.