Correlation Between AMCON Distributing and SM Investments
Can any of the company-specific risk be diversified away by investing in both AMCON Distributing and SM Investments 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 AMCON Distributing and SM Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AMCON Distributing and SM Investments, you can compare the effects of market volatilities on AMCON Distributing and SM Investments 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 AMCON Distributing with a short position of SM Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of AMCON Distributing and SM Investments.
Diversification Opportunities for AMCON Distributing and SM Investments
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between AMCON and SVTMF is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding AMCON Distributing and SM Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SM Investments and AMCON Distributing 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 AMCON Distributing are associated (or correlated) with SM Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SM Investments has no effect on the direction of AMCON Distributing i.e., AMCON Distributing and SM Investments go up and down completely randomly.
Pair Corralation between AMCON Distributing and SM Investments
Considering the 90-day investment horizon AMCON Distributing is expected to under-perform the SM Investments. In addition to that, AMCON Distributing is 1.09 times more volatile than SM Investments. It trades about -0.03 of its total potential returns per unit of risk. SM Investments is currently generating about 0.09 per unit of volatility. If you would invest 1,359 in SM Investments on December 12, 2024 and sell it today you would earn a total of 182.00 from holding SM Investments or generate 13.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 18.73% |
| Values | Daily Returns |
AMCON Distributing vs. SM Investments
Performance |
| Timeline |
| AMCON Distributing |
| SM Investments |
AMCON Distributing and SM Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AMCON Distributing and SM Investments
The main advantage of trading using opposite AMCON Distributing and SM Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AMCON Distributing position performs unexpectedly, SM Investments 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 SM Investments will offset losses from the drop in SM Investments' long position.| AMCON Distributing vs. The Chefs Warehouse | ||
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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