Correlation Between Cboe UK and Smarttech247 Group

Can any of the company-specific risk be diversified away by investing in both Cboe UK and Smarttech247 Group 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 Cboe UK and Smarttech247 Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cboe UK Consumer and Smarttech247 Group PLC, you can compare the effects of market volatilities on Cboe UK and Smarttech247 Group 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 Cboe UK with a short position of Smarttech247 Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cboe UK and Smarttech247 Group.

Diversification Opportunities for Cboe UK and Smarttech247 Group

-0.57

Correlation Coefficient

Cboe UK  Smarttech247 Group

Excellent diversification

The 3 months correlation between Cboe and Smarttech247 is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Cboe UK Consumer and Smarttech247 Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smarttech247 Group PLC and Cboe UK 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 Cboe UK Consumer are associated (or correlated) with Smarttech247 Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smarttech247 Group PLC has no effect on the direction of Cboe UK i.e., Cboe UK and Smarttech247 Group go up and down completely randomly.

Pair Corralation between Cboe UK and Smarttech247 Group

Assuming the 90 days trading horizon Cboe UK Consumer is expected to generate 0.07 times more return on investment than Smarttech247 Group. However, Cboe UK Consumer is 13.51 times less risky than Smarttech247 Group. It trades about 0.29 of its potential returns per unit of risk. Smarttech247 Group PLC is currently generating about -0.12 per unit of risk. If you would invest  3,188,749  in Cboe UK Consumer on October 26, 2024 and sell it today you would earn a total of  97,621  from holding Cboe UK Consumer or generate 3.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Cboe UK Consumer  vs.  Smarttech247 Group PLC

Pair Trading with Cboe UK and Smarttech247 Group

The main advantage of trading using opposite Cboe UK and Smarttech247 Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cboe UK position performs unexpectedly, Smarttech247 Group 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 Smarttech247 Group will offset losses from the drop in Smarttech247 Group's long position.

The idea behind Cboe UK Consumer and Smarttech247 Group PLC 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.