Correlation Between SMA Solar and ZINC MEDIA

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

Diversification Opportunities for SMA Solar and ZINC MEDIA

0.6

Correlation Coefficient

SMA Solar  ZINC MEDIA

Poor diversification

The 3 months correlation between SMA and ZINC is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding SMA Solar Technology and ZINC MEDIA GR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZINC MEDIA GR 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 ZINC MEDIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZINC MEDIA GR has no effect on the direction of SMA Solar i.e., SMA Solar and ZINC MEDIA go up and down completely randomly.

Pair Corralation between SMA Solar and ZINC MEDIA

Assuming the 90 days horizon SMA Solar Technology is expected to generate 1.65 times more return on investment than ZINC MEDIA. However, SMA Solar is 1.65 times more volatile than ZINC MEDIA GR. It trades about -0.09 of its potential returns per unit of risk. ZINC MEDIA GR is currently generating about -0.15 per unit of risk. If you would invest  1,799  in SMA Solar Technology on September 22, 2024 and sell it today you would lose (448.00) from holding SMA Solar Technology or give up 24.9% of portfolio value over 90 days.

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

SMA Solar Technology  vs.  ZINC MEDIA GR

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.

ZINC MEDIA GR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ZINC MEDIA GR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain 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.

Pair Trading with SMA Solar and ZINC MEDIA

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

The idea behind SMA Solar Technology and ZINC MEDIA GR 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.