Correlation Between Solar Integrated and SMA Solar

Can any of the company-specific risk be diversified away by investing in both Solar Integrated and SMA Solar 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 Solar Integrated and SMA Solar into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Solar Integrated Roofing and SMA Solar Technology, you can compare the effects of market volatilities on Solar Integrated and SMA Solar 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 Solar Integrated with a short position of SMA Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solar Integrated and SMA Solar.

Diversification Opportunities for Solar Integrated and SMA Solar

0.31

Correlation Coefficient

Solar Integrated  SMA Solar

Weak diversification

The 3 months correlation between Solar and SMA is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Solar Integrated Roofing and SMA Solar Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMA Solar Technology and Solar Integrated 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 Solar Integrated Roofing are associated (or correlated) with SMA Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMA Solar Technology has no effect on the direction of Solar Integrated i.e., Solar Integrated and SMA Solar go up and down completely randomly.

Pair Corralation between Solar Integrated and SMA Solar

If you would invest  127.00  in SMA Solar Technology on December 4, 2024 and sell it today you would earn a total of  35.00  from holding SMA Solar Technology or generate 27.56% return on investment over 90 days.

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

Solar Integrated Roofing  vs.  SMA Solar Technology

Solar Integrated Roofing

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Solar Integrated Roofing are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Solar Integrated exhibited solid returns over the last few months and may actually be approaching a breakup point.

SMA Solar Technology

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SMA Solar Technology are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, SMA Solar showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Solar Integrated and SMA Solar

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

The idea behind Solar Integrated Roofing and SMA Solar Technology 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.