Correlation Between Tradegate and SMA Solar

Can any of the company-specific risk be diversified away by investing in both Tradegate and SMA Solar 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 Tradegate and SMA Solar into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tradegate AG Wertpapierhandelsbank and SMA Solar Technology, you can compare the effects of market volatilities on Tradegate and SMA Solar 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 Tradegate with a short position of SMA Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tradegate and SMA Solar.

Diversification Opportunities for Tradegate and SMA Solar

-0.26

Correlation Coefficient

Tradegate  SMA Solar

Very good diversification

The 3 months correlation between Tradegate and SMA is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Tradegate AG Wertpapierhandels and SMA Solar Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMA Solar Technology and Tradegate 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 Tradegate AG Wertpapierhandelsbank are associated (or correlated) with SMA Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMA Solar Technology has no effect on the direction of Tradegate i.e., Tradegate and SMA Solar go up and down completely randomly.

Pair Corralation between Tradegate and SMA Solar

Assuming the 90 days horizon Tradegate AG Wertpapierhandelsbank is expected to generate 0.22 times more return on investment than SMA Solar. However, Tradegate AG Wertpapierhandelsbank is 4.45 times less risky than SMA Solar. It trades about 0.0 of its potential returns per unit of risk. SMA Solar Technology is currently generating about -0.07 per unit of risk. If you would invest  8,850  in Tradegate AG Wertpapierhandelsbank on September 28, 2024 and sell it today you would earn a total of  0.00  from holding Tradegate AG Wertpapierhandelsbank or generate 0.0% return on investment over 90 days.

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

Tradegate AG Wertpapierhandels  vs.  SMA Solar Technology

Tradegate AG Wertpap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tradegate AG Wertpapierhandelsbank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Tradegate is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

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 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 Tradegate and SMA Solar

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

The idea behind Tradegate AG Wertpapierhandelsbank and SMA Solar Technology 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.