Correlation Between Smith Douglas and Molson Coors

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

Diversification Opportunities for Smith Douglas and Molson Coors

-0.72

Correlation Coefficient

Smith Douglas  Molson Coors

Pay attention - limited upside

The 3 months correlation between Smith and Molson is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Smith Douglas Homes and Molson Coors Brewing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Molson Coors Brewing 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 Molson Coors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Molson Coors Brewing has no effect on the direction of Smith Douglas i.e., Smith Douglas and Molson Coors go up and down completely randomly.

Pair Corralation between Smith Douglas and Molson Coors

Given the investment horizon of 90 days Smith Douglas Homes is expected to under-perform the Molson Coors. In addition to that, Smith Douglas is 2.29 times more volatile than Molson Coors Brewing. It trades about -0.04 of its total potential returns per unit of risk. Molson Coors Brewing is currently generating about 0.13 per unit of volatility. If you would invest  5,510  in Molson Coors Brewing on September 16, 2024 and sell it today you would earn a total of  597.00  from holding Molson Coors Brewing or generate 10.83% return on investment over 90 days.

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

Smith Douglas Homes  vs.  Molson Coors Brewing

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 latest uncertain performance, the Stock's technical indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Molson Coors Brewing

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Molson Coors Brewing are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Molson Coors may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Smith Douglas and Molson Coors

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

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