Correlation Between Smith Nephew and American Medical
Can any of the company-specific risk be diversified away by investing in both Smith Nephew and American Medical 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 Nephew and American Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smith Nephew SNATS and American Medical Technologies, you can compare the effects of market volatilities on Smith Nephew and American Medical 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 Nephew with a short position of American Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smith Nephew and American Medical.
Diversification Opportunities for Smith Nephew and American Medical
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Smith and American is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Smith Nephew SNATS and American Medical Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Medical Tec and Smith Nephew 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 Nephew SNATS are associated (or correlated) with American Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Medical Tec has no effect on the direction of Smith Nephew i.e., Smith Nephew and American Medical go up and down completely randomly.
Pair Corralation between Smith Nephew and American Medical
Considering the 90-day investment horizon Smith Nephew SNATS is expected to generate 0.1 times more return on investment than American Medical. However, Smith Nephew SNATS is 10.42 times less risky than American Medical. It trades about 0.01 of its potential returns per unit of risk. American Medical Technologies is currently generating about -0.16 per unit of risk. If you would invest 2,631 in Smith Nephew SNATS on September 3, 2024 and sell it today you would lose (53.00) from holding Smith Nephew SNATS or give up 2.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 7.88% |
| Values | Daily Returns |
Smith Nephew SNATS vs. American Medical Technologies
Performance |
| Timeline |
| Smith Nephew SNATS |
| American Medical Tec |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Smith Nephew and American Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smith Nephew and American Medical
The main advantage of trading using opposite Smith Nephew and American Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smith Nephew position performs unexpectedly, American Medical 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 American Medical will offset losses from the drop in American Medical's long position.| Smith Nephew vs. CochLear Ltd ADR | Smith Nephew vs. Integer Holdings Corp | Smith Nephew vs. Orthofix Medical | Smith Nephew vs. Glaukos Corp |
| American Medical vs. Milestone Scientific | American Medical vs. Repro Med Systems | American Medical vs. Akoya Biosciences | American Medical vs. Pro Dex |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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