Correlation Between Hilton Food and SMA Solar

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

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

Diversification Opportunities for Hilton Food and SMA Solar

-0.34

Correlation Coefficient

Hilton Food  SMA Solar

Very good diversification

The 3 months correlation between Hilton and SMA is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Hilton Food Group 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 Hilton Food 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 Hilton Food Group 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 Hilton Food i.e., Hilton Food and SMA Solar go up and down completely randomly.

Pair Corralation between Hilton Food and SMA Solar

Assuming the 90 days trading horizon Hilton Food is expected to generate 16.44 times less return on investment than SMA Solar. But when comparing it to its historical volatility, Hilton Food Group is 2.44 times less risky than SMA Solar. It trades about 0.03 of its potential returns per unit of risk. SMA Solar Technology is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,397  in SMA Solar Technology on October 22, 2024 and sell it today you would earn a total of  159.00  from holding SMA Solar Technology or generate 11.38% return on investment over 90 days.

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

Hilton Food Group  vs.  SMA Solar Technology

Hilton Food Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hilton Food Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Hilton Food is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

SMA Solar Technology

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SMA Solar Technology are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, SMA Solar may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Hilton Food and SMA Solar

The main advantage of trading using opposite Hilton Food and SMA Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hilton Food 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 Hilton Food Group 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.