Correlation Between SMA Solar and AEGEAN AIRLINES

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

Diversification Opportunities for SMA Solar and AEGEAN AIRLINES

0.88

Correlation Coefficient

SMA Solar  AEGEAN AIRLINES

Very poor diversification

The 3 months correlation between SMA and AEGEAN is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding SMA Solar Technology and AEGEAN AIRLINES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AEGEAN AIRLINES 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 AEGEAN AIRLINES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AEGEAN AIRLINES has no effect on the direction of SMA Solar i.e., SMA Solar and AEGEAN AIRLINES go up and down completely randomly.

Pair Corralation between SMA Solar and AEGEAN AIRLINES

Assuming the 90 days horizon SMA Solar Technology is expected to under-perform the AEGEAN AIRLINES. In addition to that, SMA Solar is 3.06 times more volatile than AEGEAN AIRLINES. It trades about -0.08 of its total potential returns per unit of risk. AEGEAN AIRLINES is currently generating about -0.08 per unit of volatility. If you would invest  1,087  in AEGEAN AIRLINES on September 12, 2024 and sell it today you would lose (82.00) from holding AEGEAN AIRLINES or give up 7.54% of portfolio value over 90 days.

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

SMA Solar Technology  vs.  AEGEAN AIRLINES

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. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

AEGEAN AIRLINES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AEGEAN AIRLINES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with SMA Solar and AEGEAN AIRLINES

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

The idea behind SMA Solar Technology and AEGEAN AIRLINES 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.