Correlation Between Smith Midland and Tecnoglass

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Can any of the company-specific risk be diversified away by investing in both Smith Midland and Tecnoglass 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 Midland and Tecnoglass into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smith Midland Corp and Tecnoglass, you can compare the effects of market volatilities on Smith Midland and Tecnoglass 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 Midland with a short position of Tecnoglass. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smith Midland and Tecnoglass.

Diversification Opportunities for Smith Midland and Tecnoglass

SmithTecnoglassDiversified AwaySmithTecnoglassDiversified Away100%
0.83
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Smith and Tecnoglass is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Smith Midland Corp and Tecnoglass in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tecnoglass and Smith Midland 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 Midland Corp are associated (or correlated) with Tecnoglass. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tecnoglass has no effect on the direction of Smith Midland i.e., Smith Midland and Tecnoglass go up and down completely randomly.

Pair Corralation between Smith Midland and Tecnoglass

Given the investment horizon of 90 days Smith Midland Corp is expected to generate 1.71 times more return on investment than Tecnoglass. However, Smith Midland is 1.71 times more volatile than Tecnoglass. It trades about 0.09 of its potential returns per unit of risk. Tecnoglass is currently generating about 0.13 per unit of risk. If you would invest  3,589  in Smith Midland Corp on September 23, 2024 and sell it today you would earn a total of  749.00  from holding Smith Midland Corp or generate 20.87% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Smith Midland Corp  vs.  Tecnoglass

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -100102030
JavaScript chart by amCharts 3.21.15SMID TGLS
       Timeline  
Smith Midland Corp 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Smith Midland Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating forward indicators, Smith Midland exhibited solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec35404550
Tecnoglass 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Tecnoglass are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, Tecnoglass unveiled solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec70758085

Smith Midland and Tecnoglass Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-13.03-9.76-6.49-3.220.03.276.6610.0413.4216.81 0.010.020.030.040.050.06
JavaScript chart by amCharts 3.21.15SMID TGLS
       Returns  

Pair Trading with Smith Midland and Tecnoglass

The main advantage of trading using opposite Smith Midland and Tecnoglass positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smith Midland position performs unexpectedly, Tecnoglass 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 Tecnoglass will offset losses from the drop in Tecnoglass' long position.
The idea behind Smith Midland Corp and Tecnoglass 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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