Correlation Between SMA Solar and Apollo Investment

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

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

Diversification Opportunities for SMA Solar and Apollo Investment

0.17

Correlation Coefficient

SMA Solar  Apollo Investment

Average diversification

The 3 months correlation between SMA and Apollo is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding SMA Solar Technology and Apollo Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apollo Investment Corp and SMA Solar 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 SMA Solar Technology are associated (or correlated) with Apollo Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apollo Investment Corp has no effect on the direction of SMA Solar i.e., SMA Solar and Apollo Investment go up and down completely randomly.

Pair Corralation between SMA Solar and Apollo Investment

Assuming the 90 days horizon SMA Solar Technology is expected to generate 3.71 times more return on investment than Apollo Investment. However, SMA Solar is 3.71 times more volatile than Apollo Investment Corp. It trades about 0.06 of its potential returns per unit of risk. Apollo Investment Corp is currently generating about 0.01 per unit of risk. If you would invest  1,336  in SMA Solar Technology on November 30, 2024 and sell it today you would earn a total of  146.00  from holding SMA Solar Technology or generate 10.93% return on investment over 90 days.

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

SMA Solar Technology  vs.  Apollo Investment Corp

SMA Solar Technology

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SMA Solar Technology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, SMA Solar reported solid returns over the last few months and may actually be approaching a breakup point.

Apollo Investment Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Apollo Investment Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Apollo Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SMA Solar and Apollo Investment

The main advantage of trading using opposite SMA Solar and Apollo Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SMA Solar position performs unexpectedly, Apollo Investment 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 Apollo Investment will offset losses from the drop in Apollo Investment's long position.

The idea behind SMA Solar Technology and Apollo Investment Corp 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.