Correlation Between SMA Solar and Leroy Seafood

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

Diversification Opportunities for SMA Solar and Leroy Seafood

-0.51

Correlation Coefficient

SMA Solar  Leroy Seafood

Excellent diversification

The 3 months correlation between SMA and Leroy is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding SMA Solar Technology and Leroy Seafood Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leroy Seafood Group 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 Leroy Seafood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leroy Seafood Group has no effect on the direction of SMA Solar i.e., SMA Solar and Leroy Seafood go up and down completely randomly.

Pair Corralation between SMA Solar and Leroy Seafood

Assuming the 90 days trading horizon SMA Solar Technology is expected to under-perform the Leroy Seafood. In addition to that, SMA Solar is 2.3 times more volatile than Leroy Seafood Group. It trades about -0.08 of its total potential returns per unit of risk. Leroy Seafood Group is currently generating about 0.09 per unit of volatility. If you would invest  4,873  in Leroy Seafood Group on September 14, 2024 and sell it today you would earn a total of  440.00  from holding Leroy Seafood Group or generate 9.03% return on investment over 90 days.

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

SMA Solar Technology  vs.  Leroy Seafood Group

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 unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Leroy Seafood Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Leroy Seafood Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Leroy Seafood may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SMA Solar and Leroy Seafood

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

The idea behind SMA Solar Technology and Leroy Seafood Group 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.