Correlation Between Light Science and SM Energy
Can any of the company-specific risk be diversified away by investing in both Light Science and SM Energy 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 Light Science and SM Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Light Science Technologies and SM Energy Co, you can compare the effects of market volatilities on Light Science and SM Energy 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 Light Science with a short position of SM Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Light Science and SM Energy.
Diversification Opportunities for Light Science and SM Energy
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Light and 0KZA is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Light Science Technologies and SM Energy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SM Energy and Light Science 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 Light Science Technologies are associated (or correlated) with SM Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SM Energy has no effect on the direction of Light Science i.e., Light Science and SM Energy go up and down completely randomly.
Pair Corralation between Light Science and SM Energy
Assuming the 90 days trading horizon Light Science Technologies is expected to generate 1.8 times more return on investment than SM Energy. However, Light Science is 1.8 times more volatile than SM Energy Co. It trades about 0.03 of its potential returns per unit of risk. SM Energy Co is currently generating about -0.03 per unit of risk. If you would invest 250.00 in Light Science Technologies on December 11, 2024 and sell it today you would earn a total of 30.00 from holding Light Science Technologies or generate 12.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.42% |
| Values | Daily Returns |
Light Science Technologies vs. SM Energy Co
Performance |
| Timeline |
| Light Science Techno |
| SM Energy |
Light Science and SM Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Light Science and SM Energy
The main advantage of trading using opposite Light Science and SM Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Light Science position performs unexpectedly, SM Energy 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 Energy will offset losses from the drop in SM Energy's long position.| Light Science vs. iShares Physical Silver | ||
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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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