Correlation Between Public Service and Smithson Investment
Can any of the company-specific risk be diversified away by investing in both Public Service and Smithson Investment 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 Public Service and Smithson Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Public Service Enterprise and Smithson Investment Trust, you can compare the effects of market volatilities on Public Service and Smithson Investment 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 Public Service with a short position of Smithson Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Public Service and Smithson Investment.
Diversification Opportunities for Public Service and Smithson Investment
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Public and Smithson is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Public Service Enterprise and Smithson Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smithson Investment Trust and Public Service 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 Public Service Enterprise are associated (or correlated) with Smithson Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smithson Investment Trust has no effect on the direction of Public Service i.e., Public Service and Smithson Investment go up and down completely randomly.
Pair Corralation between Public Service and Smithson Investment
Assuming the 90 days trading horizon Public Service Enterprise is expected to generate 1.48 times more return on investment than Smithson Investment. However, Public Service is 1.48 times more volatile than Smithson Investment Trust. It trades about 0.18 of its potential returns per unit of risk. Smithson Investment Trust is currently generating about 0.21 per unit of risk. If you would invest 8,432 in Public Service Enterprise on October 28, 2024 and sell it today you would earn a total of 337.00 from holding Public Service Enterprise or generate 4.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 85.71% |
| Values | Daily Returns |
Public Service Enterprise vs. Smithson Investment Trust
Performance |
| Timeline |
| Public Service Enterprise |
| Smithson Investment Trust |
Public Service and Smithson Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Public Service and Smithson Investment
The main advantage of trading using opposite Public Service and Smithson Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Public Service position performs unexpectedly, Smithson Investment 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 Smithson Investment will offset losses from the drop in Smithson Investment's long position.| Public Service vs. JD Sports Fashion | Public Service vs. McEwen Mining | Public Service vs. Silver Bullet Data | Public Service vs. JB Hunt Transport |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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