Correlation Between SMA Solar and PENN NATL
Can any of the company-specific risk be diversified away by investing in both SMA Solar and PENN NATL 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 PENN NATL 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 PENN NATL GAMING, you can compare the effects of market volatilities on SMA Solar and PENN NATL 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 PENN NATL. Check out your portfolio center. Please also check ongoing floating volatility patterns of SMA Solar and PENN NATL.
Diversification Opportunities for SMA Solar and PENN NATL
Poor diversification
The 3 months correlation between SMA and PENN is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding SMA Solar Technology and PENN NATL GAMING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PENN NATL GAMING 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 PENN NATL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PENN NATL GAMING has no effect on the direction of SMA Solar i.e., SMA Solar and PENN NATL go up and down completely randomly.
Pair Corralation between SMA Solar and PENN NATL
Assuming the 90 days horizon SMA Solar Technology is expected to generate 1.26 times more return on investment than PENN NATL. However, SMA Solar is 1.26 times more volatile than PENN NATL GAMING. It trades about 0.04 of its potential returns per unit of risk. PENN NATL GAMING is currently generating about -0.04 per unit of risk. If you would invest 4,890 in SMA Solar Technology on February 28, 2024 and sell it today you would earn a total of 265.00 from holding SMA Solar Technology or generate 5.42% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
SMA Solar Technology vs. PENN NATL GAMING
Performance |
Timeline |
SMA Solar Technology |
PENN NATL GAMING |
SMA Solar and PENN NATL Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with SMA Solar and PENN NATL
The main advantage of trading using opposite SMA Solar and PENN NATL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SMA Solar position performs unexpectedly, PENN NATL 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 PENN NATL will offset losses from the drop in PENN NATL's long position.SMA Solar vs. CITIUS RESOURCES LS 005 | SMA Solar vs. SIVERS SEMICONDUCTORS AB | SMA Solar vs. NorAm Drilling AS | SMA Solar vs. Identiv |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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