Correlation Between Innovative Industrial and Smithson Investment

Can any of the company-specific risk be diversified away by investing in both Innovative Industrial and Smithson Investment 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 Innovative Industrial and Smithson Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Innovative Industrial Properties and Smithson Investment Trust, you can compare the effects of market volatilities on Innovative Industrial and Smithson Investment 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 Innovative Industrial with a short position of Smithson Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovative Industrial and Smithson Investment.

Diversification Opportunities for Innovative Industrial and Smithson Investment

0.02

Correlation Coefficient

Innovative Industrial  Smithson Investment

Significant diversification

The 3 months correlation between Innovative and Smithson is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Innovative Industrial Properti and Smithson Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smithson Investment Trust and Innovative Industrial 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 Innovative Industrial Properties are associated (or correlated) with Smithson Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smithson Investment Trust has no effect on the direction of Innovative Industrial i.e., Innovative Industrial and Smithson Investment go up and down completely randomly.

Pair Corralation between Innovative Industrial and Smithson Investment

Assuming the 90 days trading horizon Innovative Industrial Properties is expected to under-perform the Smithson Investment. In addition to that, Innovative Industrial is 4.58 times more volatile than Smithson Investment Trust. It trades about -0.14 of its total potential returns per unit of risk. Smithson Investment Trust is currently generating about 0.06 per unit of volatility. If you would invest  150,400  in Smithson Investment Trust on December 2, 2024 and sell it today you would earn a total of  4,200  from holding Smithson Investment Trust or generate 2.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Innovative Industrial Properti  vs.  Smithson Investment Trust

Innovative Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Innovative Industrial Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Smithson Investment Trust

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Smithson Investment Trust are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Smithson Investment is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Innovative Industrial and Smithson Investment

The main advantage of trading using opposite Innovative Industrial and Smithson Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innovative Industrial position performs unexpectedly, Smithson Investment 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 Smithson Investment will offset losses from the drop in Smithson Investment's long position.

The idea behind Innovative Industrial Properties and Smithson Investment Trust 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.

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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.