Correlation Between Auto Trader and Smiths Group
Can any of the company-specific risk be diversified away by investing in both Auto Trader and Smiths Group 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 Auto Trader and Smiths Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Auto Trader Group and Smiths Group Plc, you can compare the effects of market volatilities on Auto Trader and Smiths Group 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 Auto Trader with a short position of Smiths Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Auto Trader and Smiths Group.
Diversification Opportunities for Auto Trader and Smiths Group
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Auto and Smiths is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Auto Trader Group and Smiths Group Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smiths Group Plc and Auto Trader 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 Auto Trader Group are associated (or correlated) with Smiths Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smiths Group Plc has no effect on the direction of Auto Trader i.e., Auto Trader and Smiths Group go up and down completely randomly.
Pair Corralation between Auto Trader and Smiths Group
Assuming the 90 days horizon Auto Trader Group is expected to under-perform the Smiths Group. But the pink sheet apears to be less risky and, when comparing its historical volatility, Auto Trader Group is 1.29 times less risky than Smiths Group. The pink sheet trades about -0.23 of its potential returns per unit of risk. The Smiths Group Plc is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 2,093 in Smiths Group Plc on August 27, 2024 and sell it today you would earn a total of 132.00 from holding Smiths Group Plc or generate 6.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Auto Trader Group vs. Smiths Group Plc
Performance |
| Timeline |
| Auto Trader Group |
| Smiths Group Plc |
Auto Trader and Smiths Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Auto Trader and Smiths Group
The main advantage of trading using opposite Auto Trader and Smiths Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Auto Trader position performs unexpectedly, Smiths Group 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 Smiths Group will offset losses from the drop in Smiths Group's long position.| Auto Trader vs. Trivago NV | Auto Trader vs. YY Inc Class | Auto Trader vs. DouYu International Holdings | Auto Trader vs. Tencent Music Entertainment |
| Smiths Group vs. Arista Power | Smiths Group vs. Atlas Copco AB | Smiths Group vs. American Commerce Solutions |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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