Correlation Between SMA Solar and MAG SILVER

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

Diversification Opportunities for SMA Solar and MAG SILVER

-0.11

Correlation Coefficient

SMA Solar  MAG SILVER

Good diversification

The 3 months correlation between SMA and MAG is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding SMA Solar Technology and MAG SILVER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MAG SILVER 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 MAG SILVER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MAG SILVER has no effect on the direction of SMA Solar i.e., SMA Solar and MAG SILVER go up and down completely randomly.

Pair Corralation between SMA Solar and MAG SILVER

Assuming the 90 days horizon SMA Solar Technology is expected to under-perform the MAG SILVER. In addition to that, SMA Solar is 1.49 times more volatile than MAG SILVER. It trades about -0.06 of its total potential returns per unit of risk. MAG SILVER is currently generating about 0.01 per unit of volatility. If you would invest  1,410  in MAG SILVER on October 11, 2024 and sell it today you would lose (41.00) from holding MAG SILVER or give up 2.91% of portfolio value over 90 days.

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

SMA Solar Technology  vs.  MAG SILVER

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 nearly stable basic indicators, SMA Solar is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

MAG SILVER

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days MAG SILVER has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, MAG SILVER is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SMA Solar and MAG SILVER

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

The idea behind SMA Solar Technology and MAG SILVER 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.