Correlation Between SMA Solar and TOTAL ENERGY

Can any of the company-specific risk be diversified away by investing in both SMA Solar and TOTAL ENERGY 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 TOTAL ENERGY 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 TOTAL ENERGY SERVS, you can compare the effects of market volatilities on SMA Solar and TOTAL ENERGY 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 TOTAL ENERGY. Check out your portfolio center. Please also check ongoing floating volatility patterns of SMA Solar and TOTAL ENERGY.

Diversification Opportunities for SMA Solar and TOTAL ENERGY

-0.82

Correlation Coefficient

SMA Solar  TOTAL ENERGY

Pay attention - limited upside

The 3 months correlation between SMA and TOTAL is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding SMA Solar Technology and TOTAL ENERGY SERVS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOTAL ENERGY SERVS 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 TOTAL ENERGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOTAL ENERGY SERVS has no effect on the direction of SMA Solar i.e., SMA Solar and TOTAL ENERGY go up and down completely randomly.

Pair Corralation between SMA Solar and TOTAL ENERGY

Assuming the 90 days horizon SMA Solar Technology is expected to under-perform the TOTAL ENERGY. In addition to that, SMA Solar is 2.17 times more volatile than TOTAL ENERGY SERVS. It trades about -0.09 of its total potential returns per unit of risk. TOTAL ENERGY SERVS is currently generating about 0.25 per unit of volatility. If you would invest  586.00  in TOTAL ENERGY SERVS on September 17, 2024 and sell it today you would earn a total of  197.00  from holding TOTAL ENERGY SERVS or generate 33.62% return on investment over 90 days.

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

SMA Solar Technology  vs.  TOTAL ENERGY SERVS

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

TOTAL ENERGY SERVS

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TOTAL ENERGY SERVS are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, TOTAL ENERGY reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SMA Solar and TOTAL ENERGY

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

The idea behind SMA Solar Technology and TOTAL ENERGY SERVS 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.