Correlation Between IDJ FINANCIAL and SMC Investment

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

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

Diversification Opportunities for IDJ FINANCIAL and SMC Investment

0.54

Correlation Coefficient

IDJ FINANCIAL  SMC Investment

Very weak diversification

The 3 months correlation between IDJ and SMC is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding IDJ FINANCIAL and SMC Investment Trading in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMC Investment Trading and IDJ FINANCIAL 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 IDJ FINANCIAL are associated (or correlated) with SMC Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMC Investment Trading has no effect on the direction of IDJ FINANCIAL i.e., IDJ FINANCIAL and SMC Investment go up and down completely randomly.

Pair Corralation between IDJ FINANCIAL and SMC Investment

Assuming the 90 days trading horizon IDJ FINANCIAL is expected to under-perform the SMC Investment. But the stock apears to be less risky and, when comparing its historical volatility, IDJ FINANCIAL is 1.68 times less risky than SMC Investment. The stock trades about -0.05 of its potential returns per unit of risk. The SMC Investment Trading is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  765,000  in SMC Investment Trading on September 22, 2024 and sell it today you would earn a total of  39,000  from holding SMC Investment Trading or generate 5.1% return on investment over 90 days.

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

IDJ FINANCIAL  vs.  SMC Investment Trading

IDJ FINANCIAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IDJ FINANCIAL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's forward-looking indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

SMC Investment Trading

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SMC Investment Trading are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, SMC Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IDJ FINANCIAL and SMC Investment

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

The idea behind IDJ FINANCIAL and SMC Investment Trading 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.