Correlation Between SMA Solar and Vanguard Funds

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

Diversification Opportunities for SMA Solar and Vanguard Funds

-0.89

Correlation Coefficient

SMA Solar  Vanguard Funds

Pay attention - limited upside

The 3 months correlation between SMA and Vanguard is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding SMA Solar Technology and Vanguard Funds Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Funds Public 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 Vanguard Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Funds Public has no effect on the direction of SMA Solar i.e., SMA Solar and Vanguard Funds go up and down completely randomly.

Pair Corralation between SMA Solar and Vanguard Funds

Assuming the 90 days horizon SMA Solar Technology is expected to under-perform the Vanguard Funds. In addition to that, SMA Solar is 4.75 times more volatile than Vanguard Funds Public. It trades about -0.05 of its total potential returns per unit of risk. Vanguard Funds Public is currently generating about 0.25 per unit of volatility. If you would invest  9,582  in Vanguard Funds Public on September 14, 2024 and sell it today you would earn a total of  1,382  from holding Vanguard Funds Public or generate 14.42% 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.  Vanguard Funds Public

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.

Vanguard Funds Public

Risk-Adjusted Performance

19 of 100

Solid

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

Pair Trading with SMA Solar and Vanguard Funds

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

The idea behind SMA Solar Technology and Vanguard Funds Public 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.