Correlation Between SMA Solar and Newhydrogen

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

Diversification Opportunities for SMA Solar and Newhydrogen

0.76

Correlation Coefficient

SMA Solar  Newhydrogen

Poor diversification

The 3 months correlation between SMA and Newhydrogen is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding SMA Solar Technology and Newhydrogen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newhydrogen 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 Newhydrogen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newhydrogen has no effect on the direction of SMA Solar i.e., SMA Solar and Newhydrogen go up and down completely randomly.

Pair Corralation between SMA Solar and Newhydrogen

Assuming the 90 days horizon SMA Solar Technology is expected to under-perform the Newhydrogen. But the pink sheet apears to be less risky and, when comparing its historical volatility, SMA Solar Technology is 2.01 times less risky than Newhydrogen. The pink sheet trades about -0.16 of its potential returns per unit of risk. The Newhydrogen is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  0.42  in Newhydrogen on September 2, 2024 and sell it today you would lose (0.05) from holding Newhydrogen or give up 11.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

SMA Solar Technology  vs.  Newhydrogen

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 weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Newhydrogen

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Newhydrogen are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Newhydrogen may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SMA Solar and Newhydrogen

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

The idea behind SMA Solar Technology and Newhydrogen 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.