Correlation Between Smith Douglas and Paysafe

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

Diversification Opportunities for Smith Douglas and Paysafe

0.65

Correlation Coefficient

Smith Douglas  Paysafe

Poor diversification

The 3 months correlation between Smith and Paysafe is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Smith Douglas Homes and Paysafe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paysafe 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 Paysafe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paysafe has no effect on the direction of Smith Douglas i.e., Smith Douglas and Paysafe go up and down completely randomly.

Pair Corralation between Smith Douglas and Paysafe

Given the investment horizon of 90 days Smith Douglas Homes is expected to generate 0.98 times more return on investment than Paysafe. However, Smith Douglas Homes is 1.02 times less risky than Paysafe. It trades about 0.09 of its potential returns per unit of risk. Paysafe is currently generating about 0.04 per unit of risk. If you would invest  2,549  in Smith Douglas Homes on September 5, 2024 and sell it today you would earn a total of  846.00  from holding Smith Douglas Homes or generate 33.19% return on investment over 90 days.

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

Smith Douglas Homes  vs.  Paysafe

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 rather sound technical indicators, Smith Douglas is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Paysafe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Paysafe has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Paysafe is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Smith Douglas and Paysafe

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

The idea behind Smith Douglas Homes and Paysafe 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.