Correlation Between Smith Douglas and 532457BU1

Can any of the company-specific risk be diversified away by investing in both Smith Douglas and 532457BU1 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 532457BU1 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 ELI LILLY AND, you can compare the effects of market volatilities on Smith Douglas and 532457BU1 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 532457BU1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smith Douglas and 532457BU1.

Diversification Opportunities for Smith Douglas and 532457BU1

0.76

Correlation Coefficient

Smith Douglas  532457BU1

Poor diversification

The 3 months correlation between Smith and 532457BU1 is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Smith Douglas Homes and ELI LILLY AND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELI LILLY AND 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 532457BU1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ELI LILLY AND has no effect on the direction of Smith Douglas i.e., Smith Douglas and 532457BU1 go up and down completely randomly.

Pair Corralation between Smith Douglas and 532457BU1

Given the investment horizon of 90 days Smith Douglas Homes is expected to generate 2.31 times more return on investment than 532457BU1. However, Smith Douglas is 2.31 times more volatile than ELI LILLY AND. It trades about 0.04 of its potential returns per unit of risk. ELI LILLY AND is currently generating about -0.05 per unit of risk. If you would invest  2,400  in Smith Douglas Homes on September 24, 2024 and sell it today you would earn a total of  382.00  from holding Smith Douglas Homes or generate 15.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	65.15%
Values	Daily Returns

Smith Douglas Homes  vs.  ELI LILLY AND

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 weak 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.

ELI LILLY AND

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ELI LILLY AND has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for ELI LILLY AND investors.

Pair Trading with Smith Douglas and 532457BU1

The main advantage of trading using opposite Smith Douglas and 532457BU1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smith Douglas position performs unexpectedly, 532457BU1 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 532457BU1 will offset losses from the drop in 532457BU1's long position.

The idea behind Smith Douglas Homes and ELI LILLY AND 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.