Correlation Between SMA Solar and Dolly Varden

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

Diversification Opportunities for SMA Solar and Dolly Varden

-0.5

Correlation Coefficient

SMA Solar  Dolly Varden

Very good diversification

The 3 months correlation between SMA and Dolly is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding SMA Solar Technology and Dolly Varden Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dolly Varden Silver 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 Dolly Varden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dolly Varden Silver has no effect on the direction of SMA Solar i.e., SMA Solar and Dolly Varden go up and down completely randomly.

Pair Corralation between SMA Solar and Dolly Varden

Assuming the 90 days trading horizon SMA Solar Technology is expected to generate 1.05 times more return on investment than Dolly Varden. However, SMA Solar is 1.05 times more volatile than Dolly Varden Silver. It trades about 0.14 of its potential returns per unit of risk. Dolly Varden Silver is currently generating about -0.39 per unit of risk. If you would invest  1,270  in SMA Solar Technology on September 25, 2024 and sell it today you would earn a total of  125.00  from holding SMA Solar Technology or generate 9.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	38.1%
Values	Daily Returns

SMA Solar Technology  vs.  Dolly Varden Silver

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 uncertain 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.

Dolly Varden Silver

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dolly Varden Silver 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.

Pair Trading with SMA Solar and Dolly Varden

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

The idea behind SMA Solar Technology and Dolly Varden Silver 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.