Correlation Between Smith Wesson and Aerojet Rocketdyne
Can any of the company-specific risk be diversified away by investing in both Smith Wesson and Aerojet Rocketdyne 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 Smith Wesson and Aerojet Rocketdyne into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smith Wesson Brands and Aerojet Rocketdyne Holdings, you can compare the effects of market volatilities on Smith Wesson and Aerojet Rocketdyne 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 Smith Wesson with a short position of Aerojet Rocketdyne. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smith Wesson and Aerojet Rocketdyne.
Diversification Opportunities for Smith Wesson and Aerojet Rocketdyne
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Smith and Aerojet is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Smith Wesson Brands and Aerojet Rocketdyne Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerojet Rocketdyne and Smith Wesson 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 Smith Wesson Brands are associated (or correlated) with Aerojet Rocketdyne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aerojet Rocketdyne has no effect on the direction of Smith Wesson i.e., Smith Wesson and Aerojet Rocketdyne go up and down completely randomly.
Pair Corralation between Smith Wesson and Aerojet Rocketdyne
If you would invest 1,330 in Smith Wesson Brands on August 28, 2024 and sell it today you would earn a total of 47.00 from holding Smith Wesson Brands or generate 3.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 4.76% |
| Values | Daily Returns |
Smith Wesson Brands vs. Aerojet Rocketdyne Holdings
Performance |
| Timeline |
| Smith Wesson Brands |
| Aerojet Rocketdyne |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Smith Wesson and Aerojet Rocketdyne Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smith Wesson and Aerojet Rocketdyne
The main advantage of trading using opposite Smith Wesson and Aerojet Rocketdyne positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smith Wesson position performs unexpectedly, Aerojet Rocketdyne 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 Aerojet Rocketdyne will offset losses from the drop in Aerojet Rocketdyne's long position.| Smith Wesson vs. Ammo Inc | Smith Wesson vs. Park Electrochemical | Smith Wesson vs. Ammo Preferred | Smith Wesson vs. National Presto Industries |
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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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