Correlation Between Smith AO and Ballard Power
Can any of the company-specific risk be diversified away by investing in both Smith AO and Ballard Power 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 Smith AO and Ballard Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smith AO and Ballard Power Systems, you can compare the effects of market volatilities on Smith AO and Ballard Power 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 Smith AO with a short position of Ballard Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smith AO and Ballard Power.
Diversification Opportunities for Smith AO and Ballard Power
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Smith and Ballard is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Smith AO and Ballard Power Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ballard Power Systems and Smith AO 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 Smith AO are associated (or correlated) with Ballard Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ballard Power Systems has no effect on the direction of Smith AO i.e., Smith AO and Ballard Power go up and down completely randomly.
Pair Corralation between Smith AO and Ballard Power
Considering the 90-day investment horizon Smith AO is expected to generate 0.21 times more return on investment than Ballard Power. However, Smith AO is 4.68 times less risky than Ballard Power. It trades about -0.14 of its potential returns per unit of risk. Ballard Power Systems is currently generating about -0.14 per unit of risk. If you would invest 7,666 in Smith AO on August 29, 2024 and sell it today you would lose (276.00) from holding Smith AO or give up 3.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Smith AO vs. Ballard Power Systems
Performance |
| Timeline |
| Smith AO |
| Ballard Power Systems |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Smith AO and Ballard Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smith AO and Ballard Power
The main advantage of trading using opposite Smith AO and Ballard Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smith AO position performs unexpectedly, Ballard Power 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 Ballard Power will offset losses from the drop in Ballard Power's long position.| Smith AO vs. Dover | Smith AO vs. Illinois Tool Works | Smith AO vs. Xylem Inc | Smith AO vs. Franklin Electric Co |
| Ballard Power vs. Emerson Electric | Ballard Power vs. Eaton PLC | Ballard Power vs. Parker Hannifin | Ballard Power vs. Illinois Tool Works |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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