Correlation Between Smart Global and Alpha
Can any of the company-specific risk be diversified away by investing in both Smart Global and Alpha 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 Smart Global and Alpha into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smart Global Holdings and Alpha and Omega, you can compare the effects of market volatilities on Smart Global and Alpha 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 Smart Global with a short position of Alpha. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smart Global and Alpha.
Diversification Opportunities for Smart Global and Alpha
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Smart and Alpha is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Smart Global Holdings and Alpha and Omega in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha and Omega and Smart 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 Smart Global Holdings are associated (or correlated) with Alpha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha and Omega has no effect on the direction of Smart Global i.e., Smart Global and Alpha go up and down completely randomly.
Pair Corralation between Smart Global and Alpha
Considering the 90-day investment horizon Smart Global is expected to generate 1.98 times less return on investment than Alpha. But when comparing it to its historical volatility, Smart Global Holdings is 1.21 times less risky than Alpha. It trades about 0.04 of its potential returns per unit of risk. Alpha and Omega is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,174 in Alpha and Omega on August 27, 2024 and sell it today you would earn a total of 1,689 from holding Alpha and Omega or generate 77.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 88.71% |
| Values | Daily Returns |
Smart Global Holdings vs. Alpha and Omega
Performance |
| Timeline |
| Smart Global Holdings |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
| Alpha and Omega |
Smart Global and Alpha Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smart Global and Alpha
The main advantage of trading using opposite Smart Global and Alpha positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smart Global position performs unexpectedly, Alpha 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 Alpha will offset losses from the drop in Alpha's long position.| Smart Global vs. Silicon Motion Technology | Smart Global vs. MACOM Technology Solutions | Smart Global vs. Semtech | Smart Global vs. Alpha and Omega |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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