Correlation Between Smith AO and XCHG Limited
Can any of the company-specific risk be diversified away by investing in both Smith AO and XCHG Limited 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 XCHG Limited into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smith AO and XCHG Limited American, you can compare the effects of market volatilities on Smith AO and XCHG Limited 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 XCHG Limited. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smith AO and XCHG Limited.
Diversification Opportunities for Smith AO and XCHG Limited
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Smith and XCHG is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Smith AO and XCHG Limited American in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XCHG Limited American 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 XCHG Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XCHG Limited American has no effect on the direction of Smith AO i.e., Smith AO and XCHG Limited go up and down completely randomly.
Pair Corralation between Smith AO and XCHG Limited
Considering the 90-day investment horizon Smith AO is expected to generate 0.11 times more return on investment than XCHG Limited. However, Smith AO is 9.14 times less risky than XCHG Limited. It trades about -0.22 of its potential returns per unit of risk. XCHG Limited American is currently generating about -0.34 per unit of risk. If you would invest 7,666 in Smith AO on August 27, 2024 and sell it today you would lose (322.00) from holding Smith AO or give up 4.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Smith AO vs. XCHG Limited American
Performance |
| Timeline |
| Smith AO |
| XCHG Limited American |
Smith AO and XCHG Limited Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smith AO and XCHG Limited
The main advantage of trading using opposite Smith AO and XCHG Limited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smith AO position performs unexpectedly, XCHG Limited 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 XCHG Limited will offset losses from the drop in XCHG Limited's long position.| Smith AO vs. Dover | Smith AO vs. Illinois Tool Works | Smith AO vs. Xylem Inc | Smith AO vs. Franklin Electric Co |
| XCHG Limited vs. Graco Inc | XCHG Limited vs. Franklin Electric Co | XCHG Limited vs. Flowserve | XCHG Limited vs. Donaldson |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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