Correlation Between SMA Solar and GAMING FAC

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

Diversification Opportunities for SMA Solar and GAMING FAC

0.02

Correlation Coefficient

SMA Solar  GAMING FAC

Significant diversification

The 3 months correlation between SMA and GAMING is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding SMA Solar Technology and GAMING FAC SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GAMING FAC SA 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 GAMING FAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GAMING FAC SA has no effect on the direction of SMA Solar i.e., SMA Solar and GAMING FAC go up and down completely randomly.

Pair Corralation between SMA Solar and GAMING FAC

Assuming the 90 days horizon SMA Solar Technology is expected to under-perform the GAMING FAC. In addition to that, SMA Solar is 1.24 times more volatile than GAMING FAC SA. It trades about -0.04 of its total potential returns per unit of risk. GAMING FAC SA is currently generating about 0.03 per unit of volatility. If you would invest  165.00  in GAMING FAC SA on October 26, 2024 and sell it today you would earn a total of  3.00  from holding GAMING FAC SA or generate 1.82% 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.  GAMING FAC SA

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 fragile 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.

GAMING FAC SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GAMING FAC SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, GAMING FAC 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 GAMING FAC

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

The idea behind SMA Solar Technology and GAMING FAC SA 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.