Correlation Between Sunrun and SMA SOLAR

Can any of the company-specific risk be diversified away by investing in both Sunrun and SMA SOLAR 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 Sunrun and SMA SOLAR into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sunrun Inc and SMA SOLAR T, you can compare the effects of market volatilities on Sunrun and SMA SOLAR 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 Sunrun with a short position of SMA SOLAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunrun and SMA SOLAR.

Diversification Opportunities for Sunrun and SMA SOLAR

-0.64

Correlation Coefficient

Sunrun  SMA SOLAR

Excellent diversification

The 3 months correlation between Sunrun and SMA is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Sunrun Inc and SMA SOLAR T in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMA SOLAR T and Sunrun 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 Sunrun Inc are associated (or correlated) with SMA SOLAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMA SOLAR T has no effect on the direction of Sunrun i.e., Sunrun and SMA SOLAR go up and down completely randomly.

Pair Corralation between Sunrun and SMA SOLAR

Assuming the 90 days horizon Sunrun Inc is expected to under-perform the SMA SOLAR. But the stock apears to be less risky and, when comparing its historical volatility, Sunrun Inc is 1.92 times less risky than SMA SOLAR. The stock trades about -0.15 of its potential returns per unit of risk. The SMA SOLAR T is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  120.00  in SMA SOLAR T on December 21, 2024 and sell it today you would earn a total of  116.00  from holding SMA SOLAR T or generate 96.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Sunrun Inc  vs.  SMA SOLAR T

Sunrun Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sunrun Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

SMA SOLAR T

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SMA SOLAR T are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, SMA SOLAR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sunrun and SMA SOLAR

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

The idea behind Sunrun Inc and SMA SOLAR T 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.