Correlation Between Canadian General and SMA Solar

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

By analyzing existing cross correlation between Canadian General Investments and SMA Solar Technology, you can compare the effects of market volatilities on Canadian General 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 Canadian General with a short position of SMA Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian General and SMA Solar.

Diversification Opportunities for Canadian General and SMA Solar

-0.65

Correlation Coefficient

Canadian General  SMA Solar

Excellent diversification

The 3 months correlation between Canadian and SMA is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Canadian General Investments and SMA Solar Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMA Solar Technology and Canadian General 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 Canadian General Investments 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 Technology has no effect on the direction of Canadian General i.e., Canadian General and SMA Solar go up and down completely randomly.

Pair Corralation between Canadian General and SMA Solar

Assuming the 90 days trading horizon Canadian General Investments is expected to generate 0.37 times more return on investment than SMA Solar. However, Canadian General Investments is 2.7 times less risky than SMA Solar. It trades about 0.04 of its potential returns per unit of risk. SMA Solar Technology is currently generating about -0.07 per unit of risk. If you would invest  179,932  in Canadian General Investments on October 10, 2024 and sell it today you would earn a total of  46,068  from holding Canadian General Investments or generate 25.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Canadian General Investments  vs.  SMA Solar Technology

Canadian General Inv

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian General Investments are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Canadian General may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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.

Pair Trading with Canadian General and SMA Solar

The main advantage of trading using opposite Canadian General and SMA Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian General 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 Canadian General Investments and SMA Solar Technology 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.