Correlation Between Smith Douglas and CAVA Group,

Can any of the company-specific risk be diversified away by investing in both Smith Douglas and CAVA Group, 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 CAVA Group, 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 CAVA Group,, you can compare the effects of market volatilities on Smith Douglas and CAVA Group, 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 CAVA Group,. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smith Douglas and CAVA Group,.

Diversification Opportunities for Smith Douglas and CAVA Group,

0.02

Correlation Coefficient

Smith Douglas  CAVA Group,

Significant diversification

The 3 months correlation between Smith and CAVA is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Smith Douglas Homes and CAVA Group, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAVA Group, 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 CAVA Group,. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAVA Group, has no effect on the direction of Smith Douglas i.e., Smith Douglas and CAVA Group, go up and down completely randomly.

Pair Corralation between Smith Douglas and CAVA Group,

Given the investment horizon of 90 days Smith Douglas Homes is expected to under-perform the CAVA Group,. But the stock apears to be less risky and, when comparing its historical volatility, Smith Douglas Homes is 1.31 times less risky than CAVA Group,. The stock trades about -0.33 of its potential returns per unit of risk. The CAVA Group, is currently generating about -0.25 of returns per unit of risk over similar time horizon. If you would invest  14,352  in CAVA Group, on September 27, 2024 and sell it today you would lose (2,500) from holding CAVA Group, or give up 17.42% of portfolio value over 90 days.

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

Smith Douglas Homes  vs.  CAVA Group,

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 fragile 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.

CAVA Group,

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Smith Douglas and CAVA Group,

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

The idea behind Smith Douglas Homes and CAVA Group, 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .