Correlation Between Smead International and Smead Value
Can any of the company-specific risk be diversified away by investing in both Smead International and Smead Value 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 Smead International and Smead Value into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smead International Value and Smead Value Fund, you can compare the effects of market volatilities on Smead International and Smead Value 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 Smead International with a short position of Smead Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smead International and Smead Value.
Diversification Opportunities for Smead International and Smead Value
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Smead and Smead is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Smead International Value and Smead Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smead Value Fund and Smead International 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 Smead International Value are associated (or correlated) with Smead Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smead Value Fund has no effect on the direction of Smead International i.e., Smead International and Smead Value go up and down completely randomly.
Pair Corralation between Smead International and Smead Value
Assuming the 90 days horizon Smead International is expected to generate 1.08 times less return on investment than Smead Value. In addition to that, Smead International is 1.17 times more volatile than Smead Value Fund. It trades about 0.05 of its total potential returns per unit of risk. Smead Value Fund is currently generating about 0.06 per unit of volatility. If you would invest 6,558 in Smead Value Fund on September 12, 2024 and sell it today you would earn a total of 1,978 from holding Smead Value Fund or generate 30.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Smead International Value vs. Smead Value Fund
Performance |
| Timeline |
| Smead International Value |
| Smead Value Fund |
Smead International and Smead Value Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smead International and Smead Value
The main advantage of trading using opposite Smead International and Smead Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smead International position performs unexpectedly, Smead Value 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 Smead Value will offset losses from the drop in Smead Value's long position.The idea behind Smead International Value and Smead Value Fund pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| Smead Value vs. Vanguard Value Index | Smead Value vs. Dodge Cox Stock | Smead Value vs. American Mutual Fund | Smead Value vs. American Funds American |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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