Correlation Between SMC Corp and Nel ASA
Can any of the company-specific risk be diversified away by investing in both SMC Corp and Nel ASA 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 SMC Corp and Nel ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SMC Corp Japan and Nel ASA, you can compare the effects of market volatilities on SMC Corp and Nel ASA 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 SMC Corp with a short position of Nel ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of SMC Corp and Nel ASA.
Diversification Opportunities for SMC Corp and Nel ASA
Very poor diversification
The 3 months correlation between SMC and Nel is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding SMC Corp Japan and Nel ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nel ASA and SMC Corp 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 SMC Corp Japan are associated (or correlated) with Nel ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nel ASA has no effect on the direction of SMC Corp i.e., SMC Corp and Nel ASA go up and down completely randomly.
Pair Corralation between SMC Corp and Nel ASA
Assuming the 90 days horizon SMC Corp Japan is expected to under-perform the Nel ASA. But the pink sheet apears to be less risky and, when comparing its historical volatility, SMC Corp Japan is 2.49 times less risky than Nel ASA. The pink sheet trades about -0.09 of its potential returns per unit of risk. The Nel ASA is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 20.00 in Nel ASA on November 27, 2024 and sell it today you would earn a total of 2.00 from holding Nel ASA or generate 10.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SMC Corp Japan vs. Nel ASA
Performance |
| Timeline |
| SMC Corp Japan |
| Nel ASA |
SMC Corp and Nel ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SMC Corp and Nel ASA
The main advantage of trading using opposite SMC Corp and Nel ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SMC Corp position performs unexpectedly, Nel ASA 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 Nel ASA will offset losses from the drop in Nel ASA's long position.| SMC Corp vs. Schneider Electric SE | SMC Corp vs. Atlas Copco AB | SMC Corp vs. Fanuc | SMC Corp vs. Sandvik AB |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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