Correlation Between Boot Barn and SM Investments

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

By analyzing existing cross correlation between Boot Barn Holdings and SM Investments, you can compare the effects of market volatilities on Boot Barn and SM Investments 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 Boot Barn with a short position of SM Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boot Barn and SM Investments.

Diversification Opportunities for Boot Barn and SM Investments

0.23

Correlation Coefficient

Boot Barn  SM Investments

Modest diversification

The 3 months correlation between Boot and SVTMF is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Boot Barn Holdings and SM Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SM Investments and Boot Barn 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 Boot Barn Holdings are associated (or correlated) with SM Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SM Investments has no effect on the direction of Boot Barn i.e., Boot Barn and SM Investments go up and down completely randomly.

Pair Corralation between Boot Barn and SM Investments

Given the investment horizon of 90 days Boot Barn Holdings is expected to under-perform the SM Investments. In addition to that, Boot Barn is 1.97 times more volatile than SM Investments. It trades about -0.17 of its total potential returns per unit of risk. SM Investments is currently generating about -0.19 per unit of volatility. If you would invest  1,640  in SM Investments on December 20, 2024 and sell it today you would lose (245.00) from holding SM Investments or give up 14.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	88.14%
Values	Daily Returns

Boot Barn Holdings  vs.  SM Investments

Boot Barn Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Boot Barn Holdings 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.

SM Investments

Risk-Adjusted Performance

Very Weak

Over the last 90 days SM Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Boot Barn and SM Investments

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

The idea behind Boot Barn Holdings and SM Investments 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.