Correlation Between Smartmetric and Arax Holdings

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

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

Diversification Opportunities for Smartmetric and Arax Holdings

-0.15

Correlation Coefficient

Smartmetric  Arax Holdings

Good diversification

The 3 months correlation between Smartmetric and Arax is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Smartmetric and Arax Holdings Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arax Holdings Corp and Smartmetric 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 Smartmetric are associated (or correlated) with Arax Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arax Holdings Corp has no effect on the direction of Smartmetric i.e., Smartmetric and Arax Holdings go up and down completely randomly.

Pair Corralation between Smartmetric and Arax Holdings

Given the investment horizon of 90 days Smartmetric is expected to generate 7.72 times more return on investment than Arax Holdings. However, Smartmetric is 7.72 times more volatile than Arax Holdings Corp. It trades about 0.12 of its potential returns per unit of risk. Arax Holdings Corp is currently generating about 0.04 per unit of risk. If you would invest  0.11  in Smartmetric on December 4, 2024 and sell it today you would lose (0.10) from holding Smartmetric or give up 90.91% of portfolio value over 90 days.

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

Smartmetric  vs.  Arax Holdings Corp

Smartmetric

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Smartmetric are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain primary indicators, Smartmetric exhibited solid returns over the last few months and may actually be approaching a breakup point.

Arax Holdings Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Arax Holdings Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Arax Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Smartmetric and Arax Holdings

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

The idea behind Smartmetric and Arax Holdings Corp 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.