Correlation Between Smiths Group and Vestas Wind
Can any of the company-specific risk be diversified away by investing in both Smiths Group and Vestas Wind 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 Smiths Group and Vestas Wind into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smiths Group Plc and Vestas Wind Systems, you can compare the effects of market volatilities on Smiths Group and Vestas Wind 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 Smiths Group with a short position of Vestas Wind. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smiths Group and Vestas Wind.
Diversification Opportunities for Smiths Group and Vestas Wind
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Smiths and Vestas is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Smiths Group Plc and Vestas Wind Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vestas Wind Systems and Smiths Group 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 Smiths Group Plc are associated (or correlated) with Vestas Wind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vestas Wind Systems has no effect on the direction of Smiths Group i.e., Smiths Group and Vestas Wind go up and down completely randomly.
Pair Corralation between Smiths Group and Vestas Wind
Assuming the 90 days horizon Smiths Group Plc is expected to generate 0.67 times more return on investment than Vestas Wind. However, Smiths Group Plc is 1.5 times less risky than Vestas Wind. It trades about 0.12 of its potential returns per unit of risk. Vestas Wind Systems is currently generating about -0.35 per unit of risk. If you would invest 2,093 in Smiths Group Plc on August 27, 2024 and sell it today you would earn a total of 129.00 from holding Smiths Group Plc or generate 6.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Smiths Group Plc vs. Vestas Wind Systems
Performance |
| Timeline |
| Smiths Group Plc |
| Vestas Wind Systems |
Smiths Group and Vestas Wind Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smiths Group and Vestas Wind
The main advantage of trading using opposite Smiths Group and Vestas Wind positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smiths Group position performs unexpectedly, Vestas Wind 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 Vestas Wind will offset losses from the drop in Vestas Wind's long position.| Smiths Group vs. Vestas Wind Systems | Smiths Group vs. Nuscale Power Corp | Smiths Group vs. Ballard Power Systems | Smiths Group vs. Rockwell Automation |
| Vestas Wind vs. Kone Oyj ADR | Vestas Wind vs. Schneider Electric SE | Vestas Wind vs. Schneider Electric SA | Vestas Wind vs. Fanuc |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
Other Complementary Tools
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| CEOs Directory Screen CEOs from public companies around the world | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation |