Correlation Between Ecofin Global and Smithson Investment
Can any of the company-specific risk be diversified away by investing in both Ecofin Global and Smithson Investment 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 Ecofin Global and Smithson Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ecofin Global Utilities and Smithson Investment Trust, you can compare the effects of market volatilities on Ecofin Global and Smithson Investment 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 Ecofin Global with a short position of Smithson Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecofin Global and Smithson Investment.
Diversification Opportunities for Ecofin Global and Smithson Investment
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ecofin and Smithson is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Ecofin Global Utilities and Smithson Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smithson Investment Trust and Ecofin Global 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 Ecofin Global Utilities are associated (or correlated) with Smithson Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smithson Investment Trust has no effect on the direction of Ecofin Global i.e., Ecofin Global and Smithson Investment go up and down completely randomly.
Pair Corralation between Ecofin Global and Smithson Investment
Assuming the 90 days trading horizon Ecofin Global is expected to generate 1.86 times less return on investment than Smithson Investment. In addition to that, Ecofin Global is 1.52 times more volatile than Smithson Investment Trust. It trades about 0.07 of its total potential returns per unit of risk. Smithson Investment Trust is currently generating about 0.19 per unit of volatility. If you would invest 147,200 in Smithson Investment Trust on September 14, 2024 and sell it today you would earn a total of 4,800 from holding Smithson Investment Trust or generate 3.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ecofin Global Utilities vs. Smithson Investment Trust
Performance |
| Timeline |
| Ecofin Global Utilities |
| Smithson Investment Trust |
Ecofin Global and Smithson Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecofin Global and Smithson Investment
The main advantage of trading using opposite Ecofin Global and Smithson Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecofin Global position performs unexpectedly, Smithson Investment 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 Smithson Investment will offset losses from the drop in Smithson Investment's long position.| Ecofin Global vs. Eastinco Mining Exploration | Ecofin Global vs. Dolly Varden Silver | Ecofin Global vs. LPKF Laser Electronics | Ecofin Global vs. Park Hotels Resorts |
| Smithson Investment vs. Cizzle Biotechnology Holdings | Smithson Investment vs. Beazer Homes USA | Smithson Investment vs. Ecofin Global Utilities | Smithson Investment vs. Ryanair Holdings plc |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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