Correlation Between Smith Douglas and Boston Properties

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

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

Diversification Opportunities for Smith Douglas and Boston Properties

0.49

Correlation Coefficient

Smith Douglas  Boston Properties

Very weak diversification

The 3 months correlation between Smith and Boston is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Smith Douglas Homes and Boston Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Properties and Smith Douglas 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 Smith Douglas Homes are associated (or correlated) with Boston Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Properties has no effect on the direction of Smith Douglas i.e., Smith Douglas and Boston Properties go up and down completely randomly.

Pair Corralation between Smith Douglas and Boston Properties

Given the investment horizon of 90 days Smith Douglas Homes is expected to under-perform the Boston Properties. In addition to that, Smith Douglas is 1.17 times more volatile than Boston Properties. It trades about -0.38 of its total potential returns per unit of risk. Boston Properties is currently generating about -0.18 per unit of volatility. If you would invest  8,212  in Boston Properties on September 26, 2024 and sell it today you would lose (651.00) from holding Boston Properties or give up 7.93% of portfolio value over 90 days.

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

Smith Douglas Homes  vs.  Boston Properties

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 conflicting performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Boston Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boston Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Boston Properties is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Smith Douglas and Boston Properties

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

The idea behind Smith Douglas Homes and Boston Properties 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.