Correlation Between SMA Solar and PKSHA TECHNOLOGY

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

Diversification Opportunities for SMA Solar and PKSHA TECHNOLOGY

-0.72

Correlation Coefficient

SMA Solar  PKSHA TECHNOLOGY

Pay attention - limited upside

The 3 months correlation between SMA and PKSHA is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding SMA Solar Technology and PKSHA TECHNOLOGY INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PKSHA TECHNOLOGY INC 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 PKSHA TECHNOLOGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PKSHA TECHNOLOGY INC has no effect on the direction of SMA Solar i.e., SMA Solar and PKSHA TECHNOLOGY go up and down completely randomly.

Pair Corralation between SMA Solar and PKSHA TECHNOLOGY

Assuming the 90 days horizon SMA Solar Technology is expected to under-perform the PKSHA TECHNOLOGY. In addition to that, SMA Solar is 1.14 times more volatile than PKSHA TECHNOLOGY INC. It trades about -0.13 of its total potential returns per unit of risk. PKSHA TECHNOLOGY INC is currently generating about 0.14 per unit of volatility. If you would invest  1,950  in PKSHA TECHNOLOGY INC on September 2, 2024 and sell it today you would earn a total of  650.00  from holding PKSHA TECHNOLOGY INC or generate 33.33% return on investment over 90 days.

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

SMA Solar Technology  vs.  PKSHA TECHNOLOGY INC

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 uncertain 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.

PKSHA TECHNOLOGY INC

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PKSHA TECHNOLOGY INC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PKSHA TECHNOLOGY reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SMA Solar and PKSHA TECHNOLOGY

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

The idea behind SMA Solar Technology and PKSHA TECHNOLOGY INC 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..