Correlation Between Sminn Hf and Festi Hf

Can any of the company-specific risk be diversified away by investing in both Sminn Hf and Festi Hf 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 Sminn Hf and Festi Hf into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sminn hf and Festi hf, you can compare the effects of market volatilities on Sminn Hf and Festi Hf 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 Sminn Hf with a short position of Festi Hf. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sminn Hf and Festi Hf.

Diversification Opportunities for Sminn Hf and Festi Hf

0.41

Correlation Coefficient

Sminn Hf  Festi Hf

Very weak diversification

The 3 months correlation between Sminn and Festi is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Sminn hf and Festi hf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Festi hf and Sminn Hf 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 Sminn hf are associated (or correlated) with Festi Hf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Festi hf has no effect on the direction of Sminn Hf i.e., Sminn Hf and Festi Hf go up and down completely randomly.

Pair Corralation between Sminn Hf and Festi Hf

Assuming the 90 days trading horizon Sminn hf is expected to generate 1.07 times more return on investment than Festi Hf. However, Sminn Hf is 1.07 times more volatile than Festi hf. It trades about 0.07 of its potential returns per unit of risk. Festi hf is currently generating about 0.06 per unit of risk. If you would invest  1,350  in Sminn hf on December 30, 2024 and sell it today you would earn a total of  80.00  from holding Sminn hf or generate 5.93% return on investment over 90 days.

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

Sminn hf  vs.  Festi hf

Sminn hf

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sminn hf are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, Sminn Hf is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Festi hf

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Festi hf are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward indicators, Festi Hf is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Sminn Hf and Festi Hf

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

The idea behind Sminn hf and Festi hf 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.