Correlation Between ELMOS SEMICONDUCTOR and SMA Solar

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

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

Diversification Opportunities for ELMOS SEMICONDUCTOR and SMA Solar

0.22

Correlation Coefficient

ELMOS SEMICONDUCTOR  SMA Solar

Modest diversification

The 3 months correlation between ELMOS and SMA is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding ELMOS SEMICONDUCTOR 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 ELMOS SEMICONDUCTOR 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 ELMOS SEMICONDUCTOR 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 ELMOS SEMICONDUCTOR i.e., ELMOS SEMICONDUCTOR and SMA Solar go up and down completely randomly.

Pair Corralation between ELMOS SEMICONDUCTOR and SMA Solar

Assuming the 90 days trading horizon ELMOS SEMICONDUCTOR is expected to generate 0.72 times more return on investment than SMA Solar. However, ELMOS SEMICONDUCTOR is 1.39 times less risky than SMA Solar. It trades about 0.01 of its potential returns per unit of risk. SMA Solar Technology is currently generating about -0.15 per unit of risk. If you would invest  7,002  in ELMOS SEMICONDUCTOR on September 16, 2024 and sell it today you would lose (262.00) from holding ELMOS SEMICONDUCTOR or give up 3.74% of portfolio value over 90 days.

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

ELMOS SEMICONDUCTOR  vs.  SMA Solar Technology

ELMOS SEMICONDUCTOR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ELMOS SEMICONDUCTOR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, ELMOS SEMICONDUCTOR is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with ELMOS SEMICONDUCTOR and SMA Solar

The main advantage of trading using opposite ELMOS SEMICONDUCTOR and SMA Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ELMOS SEMICONDUCTOR 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 ELMOS SEMICONDUCTOR 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.