Correlation Between Smith AO and IDEX
Can any of the company-specific risk be diversified away by investing in both Smith AO and IDEX 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 IDEX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smith AO and IDEX Corporation, you can compare the effects of market volatilities on Smith AO and IDEX 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 IDEX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smith AO and IDEX.
Diversification Opportunities for Smith AO and IDEX
Average diversification
The 3 months correlation between Smith and IDEX is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Smith AO and IDEX Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDEX 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 IDEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDEX has no effect on the direction of Smith AO i.e., Smith AO and IDEX go up and down completely randomly.
Pair Corralation between Smith AO and IDEX
Considering the 90-day investment horizon Smith AO is expected to generate 1.22 times more return on investment than IDEX. However, Smith AO is 1.22 times more volatile than IDEX Corporation. It trades about 0.04 of its potential returns per unit of risk. IDEX Corporation is currently generating about 0.0 per unit of risk. If you would invest 5,760 in Smith AO on October 20, 2024 and sell it today you would earn a total of 1,421 from holding Smith AO or generate 24.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Smith AO vs. IDEX Corp.
Performance |
| Timeline |
| Smith AO |
| IDEX |
Smith AO and IDEX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smith AO and IDEX
The main advantage of trading using opposite Smith AO and IDEX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smith AO position performs unexpectedly, IDEX 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 IDEX will offset losses from the drop in IDEX's long position.| 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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