Correlation Between Smithson Investment and Polar Capital
Can any of the company-specific risk be diversified away by investing in both Smithson Investment and Polar Capital 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 Polar Capital 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 Polar Capital Technology, you can compare the effects of market volatilities on Smithson Investment and Polar Capital 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 Polar Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smithson Investment and Polar Capital.
Diversification Opportunities for Smithson Investment and Polar Capital
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Smithson and Polar is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Smithson Investment Trust and Polar Capital Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polar Capital Technology 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 Polar Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polar Capital Technology has no effect on the direction of Smithson Investment i.e., Smithson Investment and Polar Capital go up and down completely randomly.
Pair Corralation between Smithson Investment and Polar Capital
Assuming the 90 days trading horizon Smithson Investment is expected to generate 8.54 times less return on investment than Polar Capital. But when comparing it to its historical volatility, Smithson Investment Trust is 1.04 times less risky than Polar Capital. It trades about 0.01 of its potential returns per unit of risk. Polar Capital Technology is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 18,080 in Polar Capital Technology on October 11, 2024 and sell it today you would earn a total of 17,220 from holding Polar Capital Technology or generate 95.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Smithson Investment Trust vs. Polar Capital Technology
Performance |
| Timeline |
| Smithson Investment Trust |
| Polar Capital Technology |
Smithson Investment and Polar Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smithson Investment and Polar Capital
The main advantage of trading using opposite Smithson Investment and Polar Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smithson Investment position performs unexpectedly, Polar Capital 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 Polar Capital will offset losses from the drop in Polar Capital's long position.| Smithson Investment vs. Batm Advanced Communications | Smithson Investment vs. Gamma Communications PLC | Smithson Investment vs. Gear4music Plc | Smithson Investment vs. Pets at Home |
| Polar Capital vs. Smithson Investment Trust | Polar Capital vs. Bankers Investment Trust | Polar Capital vs. Zoom Video Communications | Polar Capital vs. New Residential Investment |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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