Correlation Between Fidelity Sustainable and SMA Solar

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

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

Diversification Opportunities for Fidelity Sustainable and SMA Solar

0.51

Correlation Coefficient

Fidelity Sustainable  SMA Solar

Very weak diversification

The 3 months correlation between Fidelity and SMA is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Sustainable USD 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 Fidelity Sustainable 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 Fidelity Sustainable USD 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 Fidelity Sustainable i.e., Fidelity Sustainable and SMA Solar go up and down completely randomly.

Pair Corralation between Fidelity Sustainable and SMA Solar

Assuming the 90 days trading horizon Fidelity Sustainable is expected to generate 17.42 times less return on investment than SMA Solar. But when comparing it to its historical volatility, Fidelity Sustainable USD is 17.97 times less risky than SMA Solar. It trades about 0.1 of its potential returns per unit of risk. SMA Solar Technology is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,353  in SMA Solar Technology on December 30, 2024 and sell it today you would earn a total of  411.00  from holding SMA Solar Technology or generate 30.38% return on investment over 90 days.

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

Fidelity Sustainable USD  vs.  SMA Solar Technology

Fidelity Sustainable USD

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Sustainable USD are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Fidelity Sustainable is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

SMA Solar Technology

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SMA Solar Technology are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, SMA Solar unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fidelity Sustainable and SMA Solar

The main advantage of trading using opposite Fidelity Sustainable and SMA Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Sustainable 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 Fidelity Sustainable USD 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.

Check out your portfolio center.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.