Correlation Between Bri Chem and SMG Industries

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Can any of the company-specific risk be diversified away by investing in both Bri Chem and SMG Industries 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 Bri Chem and SMG Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bri Chem Corp and SMG Industries, you can compare the effects of market volatilities on Bri Chem and SMG Industries 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 Bri Chem with a short position of SMG Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bri Chem and SMG Industries.

Diversification Opportunities for Bri Chem and SMG Industries

0.61
  Correlation Coefficient

Poor diversification

The 3 months correlation between Bri and SMG is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Bri Chem Corp and SMG Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMG Industries and Bri Chem 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 Bri Chem Corp are associated (or correlated) with SMG Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMG Industries has no effect on the direction of Bri Chem i.e., Bri Chem and SMG Industries go up and down completely randomly.

Pair Corralation between Bri Chem and SMG Industries

If you would invest  14.00  in Bri Chem Corp on September 19, 2024 and sell it today you would earn a total of  10.00  from holding Bri Chem Corp or generate 71.43% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.45%
ValuesDaily Returns

Bri Chem Corp  vs.  SMG Industries

 Performance 
       Timeline  
Bri Chem Corp 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Bri Chem Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Bri Chem reported solid returns over the last few months and may actually be approaching a breakup point.
SMG Industries 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days SMG Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Bri Chem and SMG Industries Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bri Chem and SMG Industries

The main advantage of trading using opposite Bri Chem and SMG Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bri Chem position performs unexpectedly, SMG Industries 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 SMG Industries will offset losses from the drop in SMG Industries' long position.
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The idea behind Bri Chem Corp and SMG Industries pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.

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