Correlation Between Smart Diversification and Stone Ridge
Can any of the company-specific risk be diversified away by investing in both Smart Diversification and Stone Ridge 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 Diversification and Stone Ridge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smart Diversification and Stone Ridge Diversified, you can compare the effects of market volatilities on Smart Diversification and Stone Ridge 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 Diversification with a short position of Stone Ridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smart Diversification and Stone Ridge.
Diversification Opportunities for Smart Diversification and Stone Ridge
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Smart and Stone is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Smart Diversification and Stone Ridge Diversified in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stone Ridge Diversified and Smart Diversification 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 Diversification are associated (or correlated) with Stone Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stone Ridge Diversified has no effect on the direction of Smart Diversification i.e., Smart Diversification and Stone Ridge go up and down completely randomly.
Pair Corralation between Smart Diversification and Stone Ridge
If you would invest 1,132 in Stone Ridge Diversified on September 13, 2024 and sell it today you would earn a total of 10.00 from holding Stone Ridge Diversified or generate 0.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 4.76% |
| Values | Daily Returns |
Smart Diversification vs. Stone Ridge Diversified
Performance |
| Timeline |
| Smart Diversification |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Stone Ridge Diversified |
Smart Diversification and Stone Ridge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smart Diversification and Stone Ridge
The main advantage of trading using opposite Smart Diversification and Stone Ridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smart Diversification position performs unexpectedly, Stone Ridge 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 Stone Ridge will offset losses from the drop in Stone Ridge's long position.The idea behind Smart Diversification and Stone Ridge Diversified 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.
| Stone Ridge vs. Barings Global Floating | Stone Ridge vs. Legg Mason Global | Stone Ridge vs. Siit Global Managed | Stone Ridge vs. Ab Global Risk |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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