Correlation Between Smith Douglas and Jiangsu Expressway

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

Diversification Opportunities for Smith Douglas and Jiangsu Expressway

-0.01

Correlation Coefficient

Smith Douglas  Jiangsu Expressway

Good diversification

The 3 months correlation between Smith and Jiangsu is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Smith Douglas Homes and Jiangsu Expressway Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Expressway 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 Jiangsu Expressway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Expressway has no effect on the direction of Smith Douglas i.e., Smith Douglas and Jiangsu Expressway go up and down completely randomly.

Pair Corralation between Smith Douglas and Jiangsu Expressway

Given the investment horizon of 90 days Smith Douglas Homes is expected to under-perform the Jiangsu Expressway. But the stock apears to be less risky and, when comparing its historical volatility, Smith Douglas Homes is 1.0 times less risky than Jiangsu Expressway. The stock trades about -0.12 of its potential returns per unit of risk. The Jiangsu Expressway Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,000  in Jiangsu Expressway Co on September 22, 2024 and sell it today you would earn a total of  75.00  from holding Jiangsu Expressway Co or generate 3.75% return on investment over 90 days.

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

Smith Douglas Homes  vs.  Jiangsu Expressway Co

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 unfluctuating 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.

Jiangsu Expressway

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Expressway Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Jiangsu Expressway may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Smith Douglas and Jiangsu Expressway

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

The idea behind Smith Douglas Homes and Jiangsu Expressway Co 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.