Correlation Between ITALIAN WINE and SMA Solar

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

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

Diversification Opportunities for ITALIAN WINE and SMA Solar

0.1

Correlation Coefficient

ITALIAN WINE  SMA Solar

Average diversification

The 3 months correlation between ITALIAN and SMA is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding ITALIAN WINE BRANDS 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 ITALIAN WINE 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 ITALIAN WINE BRANDS 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 ITALIAN WINE i.e., ITALIAN WINE and SMA Solar go up and down completely randomly.

Pair Corralation between ITALIAN WINE and SMA Solar

Assuming the 90 days horizon ITALIAN WINE BRANDS is expected to generate 0.63 times more return on investment than SMA Solar. However, ITALIAN WINE BRANDS is 1.58 times less risky than SMA Solar. It trades about 0.02 of its potential returns per unit of risk. SMA Solar Technology is currently generating about -0.1 per unit of risk. If you would invest  2,070  in ITALIAN WINE BRANDS on October 25, 2024 and sell it today you would earn a total of  70.00  from holding ITALIAN WINE BRANDS or generate 3.38% return on investment over 90 days.

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

ITALIAN WINE BRANDS  vs.  SMA Solar Technology

ITALIAN WINE BRANDS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ITALIAN WINE BRANDS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ITALIAN WINE is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

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. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with ITALIAN WINE and SMA Solar

The main advantage of trading using opposite ITALIAN WINE and SMA Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITALIAN WINE 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 ITALIAN WINE BRANDS 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.