Correlation Between National Presto and Smith Wesson
Can any of the company-specific risk be diversified away by investing in both National Presto and Smith Wesson 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 National Presto and Smith Wesson into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Presto Industries and Smith Wesson Brands, you can compare the effects of market volatilities on National Presto and Smith Wesson 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 National Presto with a short position of Smith Wesson. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Presto and Smith Wesson.
Diversification Opportunities for National Presto and Smith Wesson
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between National and Smith is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding National Presto Industries and Smith Wesson Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smith Wesson Brands and National Presto 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 National Presto Industries are associated (or correlated) with Smith Wesson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smith Wesson Brands has no effect on the direction of National Presto i.e., National Presto and Smith Wesson go up and down completely randomly.
Pair Corralation between National Presto and Smith Wesson
Considering the 90-day investment horizon National Presto Industries is expected to generate 0.92 times more return on investment than Smith Wesson. However, National Presto Industries is 1.09 times less risky than Smith Wesson. It trades about 0.13 of its potential returns per unit of risk. Smith Wesson Brands is currently generating about 0.11 per unit of risk. If you would invest 7,450 in National Presto Industries on August 31, 2024 and sell it today you would earn a total of 408.00 from holding National Presto Industries or generate 5.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Presto Industries vs. Smith Wesson Brands
Performance |
| Timeline |
| National Presto Indu |
| Smith Wesson Brands |
National Presto and Smith Wesson Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Presto and Smith Wesson
The main advantage of trading using opposite National Presto and Smith Wesson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Presto position performs unexpectedly, Smith Wesson 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 Smith Wesson will offset losses from the drop in Smith Wesson's long position.| National Presto vs. Park Electrochemical | National Presto vs. Ducommun Incorporated | National Presto vs. Innovative Solutions and | National Presto vs. VSE Corporation |
| Smith Wesson vs. Ammo Inc | Smith Wesson vs. Park Electrochemical | Smith Wesson vs. Ammo Preferred | Smith Wesson vs. National Presto Industries |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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