Correlation Between Smithson Investment and Markel Corp
Can any of the company-specific risk be diversified away by investing in both Smithson Investment and Markel Corp 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 Markel Corp 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 Markel Corp, you can compare the effects of market volatilities on Smithson Investment and Markel Corp 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 Markel Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smithson Investment and Markel Corp.
Diversification Opportunities for Smithson Investment and Markel Corp
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Smithson and Markel is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Smithson Investment Trust and Markel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Markel Corp 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 Markel Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Markel Corp has no effect on the direction of Smithson Investment i.e., Smithson Investment and Markel Corp go up and down completely randomly.
Pair Corralation between Smithson Investment and Markel Corp
Assuming the 90 days trading horizon Smithson Investment is expected to generate 1.25 times less return on investment than Markel Corp. But when comparing it to its historical volatility, Smithson Investment Trust is 1.36 times less risky than Markel Corp. It trades about 0.27 of its potential returns per unit of risk. Markel Corp is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 172,113 in Markel Corp on November 3, 2024 and sell it today you would earn a total of 10,666 from holding Markel Corp or generate 6.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Smithson Investment Trust vs. Markel Corp
Performance |
| Timeline |
| Smithson Investment Trust |
| Markel Corp |
Smithson Investment and Markel Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smithson Investment and Markel Corp
The main advantage of trading using opposite Smithson Investment and Markel Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smithson Investment position performs unexpectedly, Markel Corp 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 Markel Corp will offset losses from the drop in Markel Corp's long position.| Smithson Investment vs. Adriatic Metals | Smithson Investment vs. European Metals Holdings | Smithson Investment vs. Central Asia Metals | Smithson Investment vs. Spotify Technology SA |
| Markel Corp vs. BlackRock Frontiers Investment | Markel Corp vs. EJF Investments | Markel Corp vs. New Residential Investment | Markel Corp vs. Bankers Investment Trust |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
Other Complementary Tools
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments |