Correlation Between Si Bone and Smith Nephew
Can any of the company-specific risk be diversified away by investing in both Si Bone and Smith Nephew 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 Si Bone and Smith Nephew into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Si Bone and Smith Nephew SNATS, you can compare the effects of market volatilities on Si Bone and Smith Nephew 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 Si Bone with a short position of Smith Nephew. Check out your portfolio center. Please also check ongoing floating volatility patterns of Si Bone and Smith Nephew.
Diversification Opportunities for Si Bone and Smith Nephew
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between SIBN and Smith is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Si Bone and Smith Nephew SNATS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smith Nephew SNATS and Si Bone 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 Si Bone are associated (or correlated) with Smith Nephew. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smith Nephew SNATS has no effect on the direction of Si Bone i.e., Si Bone and Smith Nephew go up and down completely randomly.
Pair Corralation between Si Bone and Smith Nephew
Given the investment horizon of 90 days Si Bone is expected to under-perform the Smith Nephew. In addition to that, Si Bone is 1.89 times more volatile than Smith Nephew SNATS. It trades about -0.05 of its total potential returns per unit of risk. Smith Nephew SNATS is currently generating about -0.01 per unit of volatility. If you would invest 2,906 in Smith Nephew SNATS on August 31, 2024 and sell it today you would lose (328.00) from holding Smith Nephew SNATS or give up 11.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Si Bone vs. Smith Nephew SNATS
Performance |
| Timeline |
| Si Bone |
| Smith Nephew SNATS |
Si Bone and Smith Nephew Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Si Bone and Smith Nephew
The main advantage of trading using opposite Si Bone and Smith Nephew positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Si Bone position performs unexpectedly, Smith Nephew 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 Nephew will offset losses from the drop in Smith Nephew's long position.The idea behind Si Bone and Smith Nephew SNATS 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 Nephew vs. CochLear Ltd ADR | Smith Nephew vs. Integer Holdings Corp | Smith Nephew vs. Orthofix Medical | Smith Nephew vs. Glaukos Corp |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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