Correlation Between Ametek and Smith AO
Can any of the company-specific risk be diversified away by investing in both Ametek and Smith AO 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 Ametek and Smith AO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ametek Inc and Smith AO, you can compare the effects of market volatilities on Ametek and Smith AO 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 Ametek with a short position of Smith AO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ametek and Smith AO.
Diversification Opportunities for Ametek and Smith AO
Excellent diversification
The 3 months correlation between Ametek and Smith is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Ametek Inc and Smith AO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smith AO and Ametek 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 Ametek Inc are associated (or correlated) with Smith AO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smith AO has no effect on the direction of Ametek i.e., Ametek and Smith AO go up and down completely randomly.
Pair Corralation between Ametek and Smith AO
Considering the 90-day investment horizon Ametek Inc is expected to generate 1.97 times more return on investment than Smith AO. However, Ametek is 1.97 times more volatile than Smith AO. It trades about 0.35 of its potential returns per unit of risk. Smith AO is currently generating about -0.06 per unit of risk. If you would invest 16,805 in Ametek Inc on August 28, 2024 and sell it today you would earn a total of 2,907 from holding Ametek Inc or generate 17.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ametek Inc vs. Smith AO
Performance |
| Timeline |
| Ametek Inc |
| Smith AO |
Ametek and Smith AO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ametek and Smith AO
The main advantage of trading using opposite Ametek and Smith AO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ametek position performs unexpectedly, Smith AO 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 AO will offset losses from the drop in Smith AO's long position.The idea behind Ametek Inc and Smith AO 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.| Smith AO vs. Dover | Smith AO vs. Illinois Tool Works | Smith AO vs. Xylem Inc | Smith AO vs. Franklin Electric Co |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
Other Complementary Tools
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope |