Correlation Between Smith Douglas and Weyco

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

Diversification Opportunities for Smith Douglas and Weyco

-0.55

Correlation Coefficient

Smith Douglas  Weyco

Excellent diversification

The 3 months correlation between Smith and Weyco is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Smith Douglas Homes and Weyco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weyco Group 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 Weyco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weyco Group has no effect on the direction of Smith Douglas i.e., Smith Douglas and Weyco go up and down completely randomly.

Pair Corralation between Smith Douglas and Weyco

Given the investment horizon of 90 days Smith Douglas is expected to generate 1.32 times less return on investment than Weyco. In addition to that, Smith Douglas is 1.29 times more volatile than Weyco Group. It trades about 0.04 of its total potential returns per unit of risk. Weyco Group is currently generating about 0.06 per unit of volatility. If you would invest  2,722  in Weyco Group on September 24, 2024 and sell it today you would earn a total of  1,081  from holding Weyco Group or generate 39.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	82.82%
Values	Daily Returns

Smith Douglas Homes  vs.  Weyco Group

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.

Weyco Group

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Weyco Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Weyco unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Smith Douglas and Weyco

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

The idea behind Smith Douglas Homes and Weyco Group 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.