Correlation Between SMC Investment and IDJ FINANCIAL

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

Diversification Opportunities for SMC Investment and IDJ FINANCIAL

0.65

Correlation Coefficient

SMC Investment  IDJ FINANCIAL

Poor diversification

The 3 months correlation between SMC and IDJ is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding SMC Investment Trading and IDJ FINANCIAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDJ FINANCIAL 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 IDJ FINANCIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDJ FINANCIAL has no effect on the direction of SMC Investment i.e., SMC Investment and IDJ FINANCIAL go up and down completely randomly.

Pair Corralation between SMC Investment and IDJ FINANCIAL

Assuming the 90 days trading horizon SMC Investment Trading is expected to generate 1.6 times more return on investment than IDJ FINANCIAL. However, SMC Investment is 1.6 times more volatile than IDJ FINANCIAL. It trades about 0.26 of its potential returns per unit of risk. IDJ FINANCIAL is currently generating about 0.14 per unit of risk. If you would invest  677,000  in SMC Investment Trading on September 20, 2024 and sell it today you would earn a total of  113,000  from holding SMC Investment Trading or generate 16.69% return on investment over 90 days.

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

SMC Investment Trading  vs.  IDJ FINANCIAL

SMC Investment Trading

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SMC Investment Trading has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, SMC Investment is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

IDJ FINANCIAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IDJ FINANCIAL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward-looking indicators, IDJ FINANCIAL is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with SMC Investment and IDJ FINANCIAL

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

The idea behind SMC Investment Trading and IDJ FINANCIAL 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.