Correlation Between Smith Midland and Butler National
Can any of the company-specific risk be diversified away by investing in both Smith Midland and Butler National 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 Smith Midland and Butler National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smith Midland Corp and Butler National Corp, you can compare the effects of market volatilities on Smith Midland and Butler National 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 Smith Midland with a short position of Butler National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smith Midland and Butler National.
Diversification Opportunities for Smith Midland and Butler National
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Smith and Butler is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Smith Midland Corp and Butler National Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Butler National Corp and Smith Midland 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 Smith Midland Corp are associated (or correlated) with Butler National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Butler National Corp has no effect on the direction of Smith Midland i.e., Smith Midland and Butler National go up and down completely randomly.
Pair Corralation between Smith Midland and Butler National
Given the investment horizon of 90 days Smith Midland is expected to generate 6.15 times less return on investment than Butler National. In addition to that, Smith Midland is 1.67 times more volatile than Butler National Corp. It trades about 0.01 of its total potential returns per unit of risk. Butler National Corp is currently generating about 0.13 per unit of volatility. If you would invest 79.00 in Butler National Corp on November 3, 2024 and sell it today you would earn a total of 91.00 from holding Butler National Corp or generate 115.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Smith Midland Corp vs. Butler National Corp
Performance |
| Timeline |
| Smith Midland Corp |
| Butler National Corp |
Smith Midland and Butler National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smith Midland and Butler National
The main advantage of trading using opposite Smith Midland and Butler National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smith Midland position performs unexpectedly, Butler National 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 Butler National will offset losses from the drop in Butler National's long position.| Smith Midland vs. United States Lime | Smith Midland vs. Holcim | Smith Midland vs. Lafargeholcim Ltd ADR | Smith Midland vs. Cementos Pacasmayo SAA |
| Butler National vs. Ballistic Recovery Systems | Butler National vs. BAB Inc | Butler National vs. Optex Systems Holdings, | Butler National vs. Smith Midland 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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