Correlation Between SunHydrogen and SMA Solar

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

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

Diversification Opportunities for SunHydrogen and SMA Solar

0.21

Correlation Coefficient

SunHydrogen  SMA Solar

Modest diversification

The 3 months correlation between SunHydrogen and SMA is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding SunHydrogen 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 SunHydrogen 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 SunHydrogen 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 SunHydrogen i.e., SunHydrogen and SMA Solar go up and down completely randomly.

Pair Corralation between SunHydrogen and SMA Solar

Given the investment horizon of 90 days SunHydrogen is expected to under-perform the SMA Solar. In addition to that, SunHydrogen is 1.27 times more volatile than SMA Solar Technology. It trades about -0.02 of its total potential returns per unit of risk. SMA Solar Technology is currently generating about 0.0 per unit of volatility. If you would invest  1,450  in SMA Solar Technology on December 4, 2024 and sell it today you would lose (46.00) from holding SMA Solar Technology or give up 3.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	69.49%
Values	Daily Returns

SunHydrogen  vs.  SMA Solar Technology

SunHydrogen

Risk-Adjusted Performance

Very Weak

Over the last 90 days SunHydrogen has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

SMA Solar Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days SMA Solar Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, SMA Solar is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SunHydrogen and SMA Solar

The main advantage of trading using opposite SunHydrogen and SMA Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SunHydrogen 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 SunHydrogen 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.