Correlation Between Flexible Solutions and SM Investments
Can any of the company-specific risk be diversified away by investing in both Flexible Solutions 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 Flexible Solutions and SM Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Flexible Solutions International and SM Investments, you can compare the effects of market volatilities on Flexible Solutions 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 Flexible Solutions with a short position of SM Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Flexible Solutions and SM Investments.
Diversification Opportunities for Flexible Solutions and SM Investments
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Flexible and SVTMF is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Flexible Solutions Internation and SM Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SM Investments and Flexible Solutions 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 Flexible Solutions International 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 Flexible Solutions i.e., Flexible Solutions and SM Investments go up and down completely randomly.
Pair Corralation between Flexible Solutions and SM Investments
Considering the 90-day investment horizon Flexible Solutions International is expected to under-perform the SM Investments. In addition to that, Flexible Solutions is 2.99 times more volatile than SM Investments. It trades about -0.09 of its total potential returns per unit of risk. SM Investments is currently generating about -0.22 per unit of volatility. If you would invest 1,715 in SM Investments on September 9, 2024 and sell it today you would lose (115.00) from holding SM Investments or give up 6.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Flexible Solutions Internation vs. SM Investments
Performance |
| Timeline |
| Flexible Solutions |
| SM Investments |
Flexible Solutions and SM Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Flexible Solutions and SM Investments
The main advantage of trading using opposite Flexible Solutions and SM Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flexible Solutions 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.| Flexible Solutions vs. Oil Dri | Flexible Solutions vs. Quaker Chemical | Flexible Solutions vs. Ashland Global Holdings |
| SM Investments vs. Verra Mobility Corp | SM Investments vs. Beauty Health Co | SM Investments vs. Apogee Enterprises | SM Investments vs. Sun Country Airlines |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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