Correlation Between Smithson Investment and Bath Body
Can any of the company-specific risk be diversified away by investing in both Smithson Investment and Bath Body 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 Smithson Investment and Bath Body into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smithson Investment Trust and Bath Body Works, you can compare the effects of market volatilities on Smithson Investment and Bath Body 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 Smithson Investment with a short position of Bath Body. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smithson Investment and Bath Body.
Diversification Opportunities for Smithson Investment and Bath Body
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Smithson and Bath is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Smithson Investment Trust and Bath Body Works in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bath Body Works and Smithson Investment 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 Smithson Investment Trust are associated (or correlated) with Bath Body. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bath Body Works has no effect on the direction of Smithson Investment i.e., Smithson Investment and Bath Body go up and down completely randomly.
Pair Corralation between Smithson Investment and Bath Body
Assuming the 90 days trading horizon Smithson Investment Trust is expected to generate 0.42 times more return on investment than Bath Body. However, Smithson Investment Trust is 2.41 times less risky than Bath Body. It trades about -0.25 of its potential returns per unit of risk. Bath Body Works is currently generating about -0.12 per unit of risk. If you would invest 151,600 in Smithson Investment Trust on October 12, 2024 and sell it today you would lose (7,200) from holding Smithson Investment Trust or give up 4.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Smithson Investment Trust vs. Bath Body Works
Performance |
| Timeline |
| Smithson Investment Trust |
| Bath Body Works |
Smithson Investment and Bath Body Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smithson Investment and Bath Body
The main advantage of trading using opposite Smithson Investment and Bath Body positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smithson Investment position performs unexpectedly, Bath Body 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 Bath Body will offset losses from the drop in Bath Body's long position.| Smithson Investment vs. Blackstone Loan Financing | Smithson Investment vs. First Class Metals | Smithson Investment vs. Empire Metals Limited | Smithson Investment vs. Ross Stores |
| Bath Body vs. Smithson Investment Trust | Bath Body vs. Tavistock Investments Plc | Bath Body vs. Primorus Investments plc | Bath Body vs. Foresight Environmental Infrastructure |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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