Correlation Between Loma Negra and Smith Midland

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

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

Diversification Opportunities for Loma Negra and Smith Midland

0.69

Correlation Coefficient

Loma Negra  Smith Midland

Poor diversification

The 3 months correlation between Loma and Smith is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Loma Negra Compania and Smith Midland Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smith Midland Corp and Loma Negra 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 Loma Negra Compania are associated (or correlated) with Smith Midland. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smith Midland Corp has no effect on the direction of Loma Negra i.e., Loma Negra and Smith Midland go up and down completely randomly.

Pair Corralation between Loma Negra and Smith Midland

Given the investment horizon of 90 days Loma Negra Compania is expected to generate 1.28 times more return on investment than Smith Midland. However, Loma Negra is 1.28 times more volatile than Smith Midland Corp. It trades about -0.03 of its potential returns per unit of risk. Smith Midland Corp is currently generating about -0.15 per unit of risk. If you would invest  1,241  in Loma Negra Compania on December 27, 2024 and sell it today you would lose (111.00) from holding Loma Negra Compania or give up 8.94% of portfolio value over 90 days.

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

Loma Negra Compania  vs.  Smith Midland Corp

Loma Negra Compania

Risk-Adjusted Performance

Very Weak

Over the last 90 days Loma Negra Compania has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Loma Negra is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Smith Midland Corp

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Loma Negra and Smith Midland

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

The idea behind Loma Negra Compania and Smith Midland Corp 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.