Correlation Between Contango ORE and Smith Douglas

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

By analyzing existing cross correlation between Contango ORE and Smith Douglas Homes, you can compare the effects of market volatilities on Contango ORE and Smith Douglas 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 Contango ORE with a short position of Smith Douglas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Contango ORE and Smith Douglas.

Diversification Opportunities for Contango ORE and Smith Douglas

0.63

Correlation Coefficient

Contango ORE  Smith Douglas

Poor diversification

The 3 months correlation between Contango and Smith is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Contango ORE and Smith Douglas Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smith Douglas Homes and Contango ORE 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 Contango ORE are associated (or correlated) with Smith Douglas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smith Douglas Homes has no effect on the direction of Contango ORE i.e., Contango ORE and Smith Douglas go up and down completely randomly.

Pair Corralation between Contango ORE and Smith Douglas

Given the investment horizon of 90 days Contango ORE is expected to generate 1.82 times more return on investment than Smith Douglas. However, Contango ORE is 1.82 times more volatile than Smith Douglas Homes. It trades about -0.13 of its potential returns per unit of risk. Smith Douglas Homes is currently generating about -0.81 per unit of risk. If you would invest  1,172  in Contango ORE on October 9, 2024 and sell it today you would lose (122.00) from holding Contango ORE or give up 10.41% of portfolio value over 90 days.

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

Contango ORE  vs.  Smith Douglas Homes

Contango ORE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Contango ORE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Smith Douglas Homes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Smith Douglas Homes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of sluggish performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Contango ORE and Smith Douglas

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

The idea behind Contango ORE and Smith Douglas Homes 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.