Correlation Between Oakley Capital and SMA Solar

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

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

Diversification Opportunities for Oakley Capital and SMA Solar

0.4

Correlation Coefficient

Oakley Capital  SMA Solar

Very weak diversification

The 3 months correlation between Oakley and SMA is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Oakley Capital Investments 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 Oakley Capital 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 Oakley Capital Investments 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 Oakley Capital i.e., Oakley Capital and SMA Solar go up and down completely randomly.

Pair Corralation between Oakley Capital and SMA Solar

Assuming the 90 days trading horizon Oakley Capital is expected to generate 3.83 times less return on investment than SMA Solar. But when comparing it to its historical volatility, Oakley Capital Investments is 2.31 times less risky than SMA Solar. It trades about 0.13 of its potential returns per unit of risk. SMA Solar Technology is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1,280  in SMA Solar Technology on October 4, 2024 and sell it today you would earn a total of  210.00  from holding SMA Solar Technology or generate 16.41% return on investment over 90 days.

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

Oakley Capital Investments  vs.  SMA Solar Technology

Oakley Capital Inves

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oakley Capital Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Oakley Capital is not utilizing all of its potentials. The current 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 latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Oakley Capital and SMA Solar

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