Correlation Between SMA Solar and Roadside Real

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

Diversification Opportunities for SMA Solar and Roadside Real

-0.75

Correlation Coefficient

SMA Solar  Roadside Real

Pay attention - limited upside

The 3 months correlation between SMA and Roadside is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding SMA Solar Technology and Roadside Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roadside Real Estate 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 Roadside Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roadside Real Estate has no effect on the direction of SMA Solar i.e., SMA Solar and Roadside Real go up and down completely randomly.

Pair Corralation between SMA Solar and Roadside Real

Assuming the 90 days trading horizon SMA Solar Technology is expected to generate 2.21 times more return on investment than Roadside Real. However, SMA Solar is 2.21 times more volatile than Roadside Real Estate. It trades about 0.13 of its potential returns per unit of risk. Roadside Real Estate is currently generating about 0.1 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	Weak
Accuracy	100.0%
Values	Daily Returns

SMA Solar Technology  vs.  Roadside Real Estate

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.

Roadside Real Estate

Risk-Adjusted Performance

21 of 100

Solid

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

Pair Trading with SMA Solar and Roadside Real

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

The idea behind SMA Solar Technology and Roadside Real Estate 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.