Correlation Between Ballard Power and Smiths Group
Can any of the company-specific risk be diversified away by investing in both Ballard Power 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 Ballard Power and Smiths Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ballard Power Systems and Smiths Group Plc, you can compare the effects of market volatilities on Ballard Power 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 Ballard Power with a short position of Smiths Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ballard Power and Smiths Group.
Diversification Opportunities for Ballard Power and Smiths Group
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ballard and Smiths is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Ballard Power Systems 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 Ballard Power 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 Ballard Power Systems 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 Ballard Power i.e., Ballard Power and Smiths Group go up and down completely randomly.
Pair Corralation between Ballard Power and Smiths Group
Given the investment horizon of 90 days Ballard Power Systems is expected to under-perform the Smiths Group. In addition to that, Ballard Power is 2.01 times more volatile than Smiths Group Plc. It trades about -0.11 of its total potential returns per unit of risk. Smiths Group Plc is currently generating about 0.12 per unit of volatility. If you would invest 2,093 in Smiths Group Plc on August 27, 2024 and sell it today you would earn a total of 129.00 from holding Smiths Group Plc or generate 6.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ballard Power Systems vs. Smiths Group Plc
Performance |
| Timeline |
| Ballard Power Systems |
| Smiths Group Plc |
Ballard Power and Smiths Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ballard Power and Smiths Group
The main advantage of trading using opposite Ballard Power and Smiths Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ballard Power 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.| Ballard Power vs. Emerson Electric | Ballard Power vs. Eaton PLC | Ballard Power vs. Parker Hannifin | Ballard Power vs. Illinois Tool Works |
| Smiths Group vs. Vestas Wind Systems | Smiths Group vs. Nuscale Power Corp | Smiths Group vs. Ballard Power Systems | Smiths Group vs. Rockwell Automation |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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