Correlation Between Xinyi Solar and SMA Solar

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

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

Diversification Opportunities for Xinyi Solar and SMA Solar

0.12

Correlation Coefficient

Xinyi Solar  SMA Solar

Average diversification

The 3 months correlation between Xinyi and SMA is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Xinyi Solar Holdings 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 Xinyi 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 Xinyi Solar Holdings 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 Xinyi Solar i.e., Xinyi Solar and SMA Solar go up and down completely randomly.

Pair Corralation between Xinyi Solar and SMA Solar

Assuming the 90 days horizon Xinyi Solar Holdings is expected to generate 1.32 times more return on investment than SMA Solar. However, Xinyi Solar is 1.32 times more volatile than SMA Solar Technology. It trades about 0.06 of its potential returns per unit of risk. SMA Solar Technology is currently generating about -0.09 per unit of risk. If you would invest  711.00  in Xinyi Solar Holdings on September 15, 2024 and sell it today you would earn a total of  99.00  from holding Xinyi Solar Holdings or generate 13.92% return on investment over 90 days.

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

Xinyi Solar Holdings  vs.  SMA Solar Technology

Xinyi Solar Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Xinyi Solar Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical indicators, Xinyi Solar showed solid returns over the last few months and may actually be approaching a breakup point.

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. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Xinyi Solar and SMA Solar

The main advantage of trading using opposite Xinyi Solar and SMA Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xinyi Solar 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 Xinyi Solar Holdings 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.