Correlation Between Fortress Transp and SM Investments

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

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

Diversification Opportunities for Fortress Transp and SM Investments

0.24

Correlation Coefficient

Fortress Transp  SM Investments

Modest diversification

The 3 months correlation between Fortress and SVTMF is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Fortress Transp Infra and SM Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SM Investments and Fortress Transp 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 Fortress Transp Infra 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 Fortress Transp i.e., Fortress Transp and SM Investments go up and down completely randomly.

Pair Corralation between Fortress Transp and SM Investments

Given the investment horizon of 90 days Fortress Transp Infra is expected to under-perform the SM Investments. In addition to that, Fortress Transp is 7.31 times more volatile than SM Investments. It trades about -0.08 of its total potential returns per unit of risk. SM Investments is currently generating about -0.24 per unit of volatility. If you would invest  1,640  in SM Investments on October 26, 2024 and sell it today you would lose (99.00) from holding SM Investments or give up 6.04% of portfolio value over 90 days.

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

Fortress Transp Infra  vs.  SM Investments

Fortress Transp Infra

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fortress Transp Infra has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

SM Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SM Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's primary indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Fortress Transp and SM Investments

The main advantage of trading using opposite Fortress Transp and SM Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortress Transp 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 Fortress Transp Infra 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.