Correlation Between SMA Solar and Kering SA

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

Diversification Opportunities for SMA Solar and Kering SA

-0.18

Correlation Coefficient

SMA Solar  Kering SA

Good diversification

The 3 months correlation between SMA and Kering is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding SMA Solar Technology and Kering SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kering 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 Kering SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kering SA has no effect on the direction of SMA Solar i.e., SMA Solar and Kering SA go up and down completely randomly.

Pair Corralation between SMA Solar and Kering SA

Assuming the 90 days horizon SMA Solar Technology is expected to generate 1.99 times more return on investment than Kering SA. However, SMA Solar is 1.99 times more volatile than Kering SA. It trades about 0.18 of its potential returns per unit of risk. Kering SA is currently generating about -0.02 per unit of risk. If you would invest  1,351  in SMA Solar Technology on December 19, 2024 and sell it today you would earn a total of  919.00  from holding SMA Solar Technology or generate 68.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

SMA Solar Technology  vs.  Kering SA

SMA Solar Technology

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SMA Solar Technology are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SMA Solar reported solid returns over the last few months and may actually be approaching a breakup point.

Kering SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kering SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Kering SA 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 Kering SA

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

The idea behind SMA Solar Technology and Kering 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.