Correlation Between Alfas Solar and Smart Gunes

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

By analyzing existing cross correlation between Alfas Solar Enerji and Smart Gunes Enerjisi, you can compare the effects of market volatilities on Alfas Solar and Smart Gunes 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 Alfas Solar with a short position of Smart Gunes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alfas Solar and Smart Gunes.

Diversification Opportunities for Alfas Solar and Smart Gunes

0.72

Correlation Coefficient

Alfas Solar  Smart Gunes

Poor diversification

The 3 months correlation between Alfas and Smart is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Alfas Solar Enerji and Smart Gunes Enerjisi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smart Gunes Enerjisi and Alfas 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 Alfas Solar Enerji are associated (or correlated) with Smart Gunes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smart Gunes Enerjisi has no effect on the direction of Alfas Solar i.e., Alfas Solar and Smart Gunes go up and down completely randomly.

Pair Corralation between Alfas Solar and Smart Gunes

Assuming the 90 days trading horizon Alfas Solar Enerji is expected to generate 1.4 times more return on investment than Smart Gunes. However, Alfas Solar is 1.4 times more volatile than Smart Gunes Enerjisi. It trades about 0.29 of its potential returns per unit of risk. Smart Gunes Enerjisi is currently generating about 0.12 per unit of risk. If you would invest  5,290  in Alfas Solar Enerji on September 23, 2024 and sell it today you would earn a total of  1,005  from holding Alfas Solar Enerji or generate 19.0% return on investment over 90 days.

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

Alfas Solar Enerji  vs.  Smart Gunes Enerjisi

Alfas Solar Enerji

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alfas Solar Enerji are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent forward indicators, Alfas Solar demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Smart Gunes Enerjisi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Smart Gunes Enerjisi has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, Smart Gunes is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Alfas Solar and Smart Gunes

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

The idea behind Alfas Solar Enerji and Smart Gunes Enerjisi 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.