Correlation Between Hillenbrand and Smith AO

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

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

Diversification Opportunities for Hillenbrand and Smith AO

-0.62

Correlation Coefficient

Hillenbrand  Smith AO

Excellent diversification

The 3 months correlation between Hillenbrand and Smith is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Hillenbrand and Smith AO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smith AO and Hillenbrand 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 Hillenbrand are associated (or correlated) with Smith AO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smith AO has no effect on the direction of Hillenbrand i.e., Hillenbrand and Smith AO go up and down completely randomly.

Pair Corralation between Hillenbrand and Smith AO

Allowing for the 90-day total investment horizon Hillenbrand is expected to under-perform the Smith AO. In addition to that, Hillenbrand is 1.42 times more volatile than Smith AO. It trades about -0.02 of its total potential returns per unit of risk. Smith AO is currently generating about 0.03 per unit of volatility. If you would invest  5,692  in Smith AO on October 11, 2024 and sell it today you would earn a total of  1,176  from holding Smith AO or generate 20.66% return on investment over 90 days.

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

Hillenbrand  vs.  Smith AO

Hillenbrand

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hillenbrand are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, Hillenbrand demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Smith AO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Smith AO has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Hillenbrand and Smith AO

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

The idea behind Hillenbrand and Smith AO 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.

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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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.