Correlation Between Arcosa and Smith Douglas
Can any of the company-specific risk be diversified away by investing in both Arcosa and Smith Douglas 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 Arcosa and Smith Douglas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arcosa Inc and Smith Douglas Homes, you can compare the effects of market volatilities on Arcosa and Smith Douglas 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 Arcosa with a short position of Smith Douglas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arcosa and Smith Douglas.
Diversification Opportunities for Arcosa and Smith Douglas
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Arcosa and Smith is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Arcosa Inc and Smith Douglas Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smith Douglas Homes and Arcosa 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 Arcosa Inc are associated (or correlated) with Smith Douglas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smith Douglas Homes has no effect on the direction of Arcosa i.e., Arcosa and Smith Douglas go up and down completely randomly.
Pair Corralation between Arcosa and Smith Douglas
Considering the 90-day investment horizon Arcosa is expected to generate 1.18 times less return on investment than Smith Douglas. But when comparing it to its historical volatility, Arcosa Inc is 1.51 times less risky than Smith Douglas. It trades about 0.08 of its potential returns per unit of risk. Smith Douglas Homes is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,400 in Smith Douglas Homes on September 13, 2024 and sell it today you would earn a total of 907.50 from holding Smith Douglas Homes or generate 37.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 47.17% |
| Values | Daily Returns |
Arcosa Inc vs. Smith Douglas Homes
Performance |
| Timeline |
| Arcosa Inc |
| Smith Douglas Homes |
Arcosa and Smith Douglas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arcosa and Smith Douglas
The main advantage of trading using opposite Arcosa and Smith Douglas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arcosa position performs unexpectedly, Smith Douglas 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 Smith Douglas will offset losses from the drop in Smith Douglas' long position.| Arcosa vs. Construction Partners | Arcosa vs. Topbuild Corp | Arcosa vs. Comfort Systems USA | Arcosa vs. Ameresco |
| Smith Douglas vs. Arrow Electronics | Smith Douglas vs. Mesa Air Group | Smith Douglas vs. Sun Country Airlines | Smith Douglas vs. Sandstorm Gold Ltd |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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