Correlation Between TBC Bank and SMA Solar

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

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

Diversification Opportunities for TBC Bank and SMA Solar

0.62

Correlation Coefficient

TBC Bank  SMA Solar

Poor diversification

The 3 months correlation between TBC and SMA is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding TBC Bank Group 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 TBC Bank 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 TBC Bank Group 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 TBC Bank i.e., TBC Bank and SMA Solar go up and down completely randomly.

Pair Corralation between TBC Bank and SMA Solar

Assuming the 90 days trading horizon TBC Bank is expected to generate 1.8 times less return on investment than SMA Solar. But when comparing it to its historical volatility, TBC Bank Group is 2.51 times less risky than SMA Solar. It trades about 0.28 of its potential returns per unit of risk. SMA Solar Technology is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,319  in SMA Solar Technology on December 20, 2024 and sell it today you would earn a total of  1,058  from holding SMA Solar Technology or generate 80.21% return on investment over 90 days.

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

TBC Bank Group  vs.  SMA Solar Technology

TBC Bank Group

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TBC Bank Group are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, TBC Bank unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, SMA Solar unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TBC Bank and SMA Solar

The main advantage of trading using opposite TBC Bank and SMA Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TBC Bank 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 TBC Bank Group 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.