Correlation Between United States and Smith Midland
Can any of the company-specific risk be diversified away by investing in both United States and Smith Midland 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 United States and Smith Midland into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United States Lime and Smith Midland Corp, you can compare the effects of market volatilities on United States and Smith Midland 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 United States with a short position of Smith Midland. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and Smith Midland.
Diversification Opportunities for United States and Smith Midland
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between United and Smith is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding United States Lime and Smith Midland Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smith Midland Corp and United States 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 United States Lime are associated (or correlated) with Smith Midland. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smith Midland Corp has no effect on the direction of United States i.e., United States and Smith Midland go up and down completely randomly.
Pair Corralation between United States and Smith Midland
Given the investment horizon of 90 days United States Lime is expected to under-perform the Smith Midland. But the stock apears to be less risky and, when comparing its historical volatility, United States Lime is 1.24 times less risky than Smith Midland. The stock trades about -0.2 of its potential returns per unit of risk. The Smith Midland Corp is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest 4,377 in Smith Midland Corp on October 20, 2024 and sell it today you would lose (282.00) from holding Smith Midland Corp or give up 6.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
United States Lime vs. Smith Midland Corp
Performance |
| Timeline |
| United States Lime |
| Smith Midland Corp |
United States and Smith Midland Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United States and Smith Midland
The main advantage of trading using opposite United States and Smith Midland positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States position performs unexpectedly, Smith Midland 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 Smith Midland will offset losses from the drop in Smith Midland's long position.| United States vs. Smith Midland Corp | United States vs. Holcim | United States vs. Lafargeholcim Ltd ADR | United States vs. Cementos Pacasmayo SAA |
| Smith Midland vs. United States Lime | Smith Midland vs. Holcim | Smith Midland vs. Lafargeholcim Ltd ADR | Smith Midland vs. Cementos Pacasmayo SAA |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
Other Complementary Tools
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges |