Correlation Between Molson Coors and Smithson Investment

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Can any of the company-specific risk be diversified away by investing in both Molson Coors 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 Molson Coors and Smithson Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Molson Coors Beverage and Smithson Investment Trust, you can compare the effects of market volatilities on Molson Coors 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 Molson Coors with a short position of Smithson Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Molson Coors and Smithson Investment.

Diversification Opportunities for Molson Coors and Smithson Investment

0.87
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Molson and Smithson is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Molson Coors Beverage 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 Molson Coors 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 Molson Coors Beverage 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 Molson Coors i.e., Molson Coors and Smithson Investment go up and down completely randomly.

Pair Corralation between Molson Coors and Smithson Investment

Assuming the 90 days trading horizon Molson Coors Beverage is expected to generate 1.62 times more return on investment than Smithson Investment. However, Molson Coors is 1.62 times more volatile than Smithson Investment Trust. It trades about 0.06 of its potential returns per unit of risk. Smithson Investment Trust is currently generating about 0.04 per unit of risk. If you would invest  5,611  in Molson Coors Beverage on September 27, 2024 and sell it today you would earn a total of  257.00  from holding Molson Coors Beverage or generate 4.58% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Molson Coors Beverage  vs.  Smithson Investment Trust

 Performance 
       Timeline  
Molson Coors Beverage 

Risk-Adjusted Performance

4 of 100

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

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Smithson Investment Trust are ranked lower than 2 (%) 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.

Molson Coors and Smithson Investment Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Molson Coors and Smithson Investment

The main advantage of trading using opposite Molson Coors and Smithson Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Molson Coors 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 Molson Coors Beverage 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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