Correlation Between Smithson Investment and Ecofin Global
Can any of the company-specific risk be diversified away by investing in both Smithson Investment and Ecofin Global 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 Ecofin Global 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 Ecofin Global Utilities, you can compare the effects of market volatilities on Smithson Investment and Ecofin Global 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 Ecofin Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smithson Investment and Ecofin Global.
Diversification Opportunities for Smithson Investment and Ecofin Global
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Smithson and Ecofin is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Smithson Investment Trust and Ecofin Global Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecofin Global Utilities 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 Ecofin Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecofin Global Utilities has no effect on the direction of Smithson Investment i.e., Smithson Investment and Ecofin Global go up and down completely randomly.
Pair Corralation between Smithson Investment and Ecofin Global
Assuming the 90 days trading horizon Smithson Investment Trust is expected to under-perform the Ecofin Global. But the stock apears to be less risky and, when comparing its historical volatility, Smithson Investment Trust is 1.93 times less risky than Ecofin Global. The stock trades about -0.27 of its potential returns per unit of risk. The Ecofin Global Utilities is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 18,700 in Ecofin Global Utilities on October 13, 2024 and sell it today you would lose (550.00) from holding Ecofin Global Utilities or give up 2.94% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Smithson Investment Trust vs. Ecofin Global Utilities
Performance |
| Timeline |
| Smithson Investment Trust |
| Ecofin Global Utilities |
Smithson Investment and Ecofin Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smithson Investment and Ecofin Global
The main advantage of trading using opposite Smithson Investment and Ecofin Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smithson Investment position performs unexpectedly, Ecofin Global 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 Ecofin Global will offset losses from the drop in Ecofin Global's long position.| Smithson Investment vs. Software Circle plc | Smithson Investment vs. Teradata Corp | Smithson Investment vs. Public Storage | Smithson Investment vs. SMA Solar Technology |
| Ecofin Global vs. Tavistock Investments Plc | Ecofin Global vs. Melia Hotels | Ecofin Global vs. Lindsell Train Investment | Ecofin Global vs. Smithson 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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