Correlation Between Schroders Investment and Smithson Investment

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

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

Diversification Opportunities for Schroders Investment and Smithson Investment

0.36

Correlation Coefficient

Schroders Investment  Smithson Investment

Weak diversification

The 3 months correlation between Schroders and Smithson is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Schroders Investment Trusts 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 Schroders Investment 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 Schroders Investment Trusts 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 Schroders Investment i.e., Schroders Investment and Smithson Investment go up and down completely randomly.

Pair Corralation between Schroders Investment and Smithson Investment

Assuming the 90 days trading horizon Schroders Investment is expected to generate 1.56 times less return on investment than Smithson Investment. But when comparing it to its historical volatility, Schroders Investment Trusts is 1.11 times less risky than Smithson Investment. It trades about 0.09 of its potential returns per unit of risk. Smithson Investment Trust is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  141,600  in Smithson Investment Trust on September 12, 2024 and sell it today you would earn a total of  10,000  from holding Smithson Investment Trust or generate 7.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Schroders Investment Trusts  vs.  Smithson Investment Trust

Schroders Investment

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Schroders Investment Trusts are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Schroders Investment is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Smithson Investment Trust

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Smithson Investment Trust are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Smithson Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Schroders Investment and Smithson Investment

The main advantage of trading using opposite Schroders Investment and Smithson Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schroders Investment 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 Schroders Investment Trusts 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.

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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.