Correlation Between Vodafone Group and Smithson Investment
Can any of the company-specific risk be diversified away by investing in both Vodafone Group 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 Vodafone Group and Smithson Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vodafone Group PLC and Smithson Investment Trust, you can compare the effects of market volatilities on Vodafone Group 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 Vodafone Group with a short position of Smithson Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vodafone Group and Smithson Investment.
Diversification Opportunities for Vodafone Group and Smithson Investment
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Vodafone and Smithson is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Vodafone Group PLC 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 Vodafone Group 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 Vodafone Group PLC 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 Vodafone Group i.e., Vodafone Group and Smithson Investment go up and down completely randomly.
Pair Corralation between Vodafone Group and Smithson Investment
Assuming the 90 days trading horizon Vodafone Group PLC is expected to under-perform the Smithson Investment. In addition to that, Vodafone Group is 2.26 times more volatile than Smithson Investment Trust. It trades about -0.09 of its total potential returns per unit of risk. Smithson Investment Trust is currently generating about 0.12 per unit of volatility. If you would invest 143,400 in Smithson Investment Trust on September 3, 2024 and sell it today you would earn a total of 6,200 from holding Smithson Investment Trust or generate 4.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vodafone Group PLC vs. Smithson Investment Trust
Performance |
| Timeline |
| Vodafone Group PLC |
| Smithson Investment Trust |
Vodafone Group and Smithson Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vodafone Group and Smithson Investment
The main advantage of trading using opposite Vodafone Group and Smithson Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vodafone Group 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.| Vodafone Group vs. Norwegian Air Shuttle | Vodafone Group vs. Prosiebensat 1 Media | Vodafone Group vs. Sealed Air Corp | Vodafone Group vs. Flutter Entertainment PLC |
| Smithson Investment vs. SupplyMe Capital PLC | Smithson Investment vs. 88 Energy | Smithson Investment vs. Vodafone Group PLC | Smithson Investment vs. Vodafone Group PLC |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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