Correlation Between SMC Corp and Rockwell Automation
Can any of the company-specific risk be diversified away by investing in both SMC Corp and Rockwell Automation 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 Rockwell Automation 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 Rockwell Automation, you can compare the effects of market volatilities on SMC Corp and Rockwell Automation 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 Rockwell Automation. Check out your portfolio center. Please also check ongoing floating volatility patterns of SMC Corp and Rockwell Automation.
Diversification Opportunities for SMC Corp and Rockwell Automation
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between SMC and Rockwell is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding SMC Corp Japan and Rockwell Automation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rockwell Automation 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 Rockwell Automation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rockwell Automation has no effect on the direction of SMC Corp i.e., SMC Corp and Rockwell Automation go up and down completely randomly.
Pair Corralation between SMC Corp and Rockwell Automation
Assuming the 90 days horizon SMC Corp is expected to generate 2.75 times less return on investment than Rockwell Automation. But when comparing it to its historical volatility, SMC Corp Japan is 2.07 times less risky than Rockwell Automation. It trades about 0.11 of its potential returns per unit of risk. Rockwell Automation is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 26,862 in Rockwell Automation on August 26, 2024 and sell it today you would earn a total of 2,224 from holding Rockwell Automation or generate 8.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SMC Corp Japan vs. Rockwell Automation
Performance |
| Timeline |
| SMC Corp Japan |
| Rockwell Automation |
SMC Corp and Rockwell Automation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SMC Corp and Rockwell Automation
The main advantage of trading using opposite SMC Corp and Rockwell Automation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SMC Corp position performs unexpectedly, Rockwell Automation 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 Rockwell Automation will offset losses from the drop in Rockwell Automation's long position.| SMC Corp vs. Schneider Electric SE | SMC Corp vs. Atlas Copco AB | SMC Corp vs. Fanuc | SMC Corp vs. Sandvik AB |
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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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