Correlation Between Smith Douglas and ICC Holdings

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

Diversification Opportunities for Smith Douglas and ICC Holdings

-0.28

Correlation Coefficient

Smith Douglas  ICC Holdings

Very good diversification

The 3 months correlation between Smith and ICC is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Smith Douglas Homes and ICC Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICC Holdings 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 ICC Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ICC Holdings has no effect on the direction of Smith Douglas i.e., Smith Douglas and ICC Holdings go up and down completely randomly.

Pair Corralation between Smith Douglas and ICC Holdings

Given the investment horizon of 90 days Smith Douglas Homes is expected to under-perform the ICC Holdings. In addition to that, Smith Douglas is 4.25 times more volatile than ICC Holdings. It trades about -0.17 of its total potential returns per unit of risk. ICC Holdings is currently generating about 0.05 per unit of volatility. If you would invest  2,296  in ICC Holdings on October 1, 2024 and sell it today you would earn a total of  44.00  from holding ICC Holdings or generate 1.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	88.89%
Values	Daily Returns

Smith Douglas Homes  vs.  ICC Holdings

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.

ICC Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ICC Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, ICC Holdings is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Smith Douglas and ICC Holdings

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

The idea behind Smith Douglas Homes and ICC Holdings 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.