Correlation Between SMC Investment and Riverway Management

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

By analyzing existing cross correlation between SMC Investment Trading and Riverway Management JSC, you can compare the effects of market volatilities on SMC Investment and Riverway Management 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 SMC Investment with a short position of Riverway Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of SMC Investment and Riverway Management.

Diversification Opportunities for SMC Investment and Riverway Management

-0.12

Correlation Coefficient

SMC Investment  Riverway Management

Good diversification

The 3 months correlation between SMC and Riverway is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding SMC Investment Trading and Riverway Management JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Riverway Management JSC and SMC Investment 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 SMC Investment Trading are associated (or correlated) with Riverway Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Riverway Management JSC has no effect on the direction of SMC Investment i.e., SMC Investment and Riverway Management go up and down completely randomly.

Pair Corralation between SMC Investment and Riverway Management

Assuming the 90 days trading horizon SMC Investment Trading is expected to generate 0.94 times more return on investment than Riverway Management. However, SMC Investment Trading is 1.06 times less risky than Riverway Management. It trades about 0.13 of its potential returns per unit of risk. Riverway Management JSC is currently generating about -0.02 per unit of risk. If you would invest  701,000  in SMC Investment Trading on October 7, 2024 and sell it today you would earn a total of  110,000  from holding SMC Investment Trading or generate 15.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	76.74%
Values	Daily Returns

SMC Investment Trading  vs.  Riverway Management JSC

SMC Investment Trading

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SMC Investment Trading are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, SMC Investment displayed solid returns over the last few months and may actually be approaching a breakup point.

Riverway Management JSC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Riverway Management JSC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with SMC Investment and Riverway Management

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

The idea behind SMC Investment Trading and Riverway Management JSC 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.