Correlation Between Weyco and Smith Douglas
Can any of the company-specific risk be diversified away by investing in both Weyco and Smith Douglas 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 Weyco and Smith Douglas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Weyco Group and Smith Douglas Homes, you can compare the effects of market volatilities on Weyco and Smith Douglas 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 Weyco with a short position of Smith Douglas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Weyco and Smith Douglas.
Diversification Opportunities for Weyco and Smith Douglas
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Weyco and Smith is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Weyco Group and Smith Douglas Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smith Douglas Homes and Weyco 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 Weyco Group are associated (or correlated) with Smith Douglas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smith Douglas Homes has no effect on the direction of Weyco i.e., Weyco and Smith Douglas go up and down completely randomly.
Pair Corralation between Weyco and Smith Douglas
Given the investment horizon of 90 days Weyco Group is expected to generate 1.33 times more return on investment than Smith Douglas. However, Weyco is 1.33 times more volatile than Smith Douglas Homes. It trades about 0.07 of its potential returns per unit of risk. Smith Douglas Homes is currently generating about -0.01 per unit of risk. If you would invest 3,382 in Weyco Group on August 31, 2024 and sell it today you would earn a total of 181.00 from holding Weyco Group or generate 5.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Weyco Group vs. Smith Douglas Homes
Performance |
| Timeline |
| Weyco Group |
| Smith Douglas Homes |
Weyco and Smith Douglas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Weyco and Smith Douglas
The main advantage of trading using opposite Weyco and Smith Douglas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weyco position performs unexpectedly, Smith Douglas 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 Douglas will offset losses from the drop in Smith Douglas' long position.The idea behind Weyco Group and Smith Douglas Homes 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.| Smith Douglas vs. EMCOR Group | Smith Douglas vs. CenterPoint Energy | Smith Douglas vs. Highway Holdings Limited | Smith Douglas vs. United Utilities Group |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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