Correlation Between OmniAb and Smith Douglas
Can any of the company-specific risk be diversified away by investing in both OmniAb and Smith Douglas 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 OmniAb and Smith Douglas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between OmniAb Inc and Smith Douglas Homes, you can compare the effects of market volatilities on OmniAb and Smith Douglas 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 OmniAb with a short position of Smith Douglas. Check out your portfolio center. Please also check ongoing floating volatility patterns of OmniAb and Smith Douglas.
Diversification Opportunities for OmniAb and Smith Douglas
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between OmniAb and Smith is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding OmniAb Inc and Smith Douglas Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smith Douglas Homes and OmniAb 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 OmniAb Inc are associated (or correlated) with Smith Douglas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smith Douglas Homes has no effect on the direction of OmniAb i.e., OmniAb and Smith Douglas go up and down completely randomly.
Pair Corralation between OmniAb and Smith Douglas
Assuming the 90 days horizon OmniAb Inc is expected to generate 50.78 times more return on investment than Smith Douglas. However, OmniAb is 50.78 times more volatile than Smith Douglas Homes. It trades about 0.14 of its potential returns per unit of risk. Smith Douglas Homes is currently generating about 0.06 per unit of risk. If you would invest 71.00 in OmniAb Inc on September 4, 2024 and sell it today you would lose (41.00) from holding OmniAb Inc or give up 57.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 73.89% |
| Values | Daily Returns |
OmniAb Inc vs. Smith Douglas Homes
Performance |
| Timeline |
| OmniAb Inc |
| Smith Douglas Homes |
OmniAb and Smith Douglas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with OmniAb and Smith Douglas
The main advantage of trading using opposite OmniAb and Smith Douglas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OmniAb position performs unexpectedly, Smith Douglas 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 Douglas will offset losses from the drop in Smith Douglas' long position.The idea behind OmniAb Inc and Smith Douglas Homes pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Smith Douglas vs. Tandy Leather Factory | Smith Douglas vs. The9 Ltd ADR | Smith Douglas vs. Ralph Lauren Corp | Smith Douglas vs. Burlington Stores |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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