Correlation Between Smith Micro and Aware

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

By analyzing existing cross correlation between Smith Micro Software and Aware Inc, you can compare the effects of market volatilities on Smith Micro and Aware 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 Micro with a short position of Aware. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smith Micro and Aware.

Diversification Opportunities for Smith Micro and Aware

0.41

Correlation Coefficient

Smith Micro  Aware

Very weak diversification

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

Pair Corralation between Smith Micro and Aware

Given the investment horizon of 90 days Smith Micro Software is expected to under-perform the Aware. In addition to that, Smith Micro is 1.96 times more volatile than Aware Inc. It trades about -0.03 of its total potential returns per unit of risk. Aware Inc is currently generating about 0.01 per unit of volatility. If you would invest  180.00  in Aware Inc on September 28, 2024 and sell it today you would lose (27.00) from holding Aware Inc or give up 15.0% of portfolio value over 90 days.

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

Smith Micro Software  vs.  Aware Inc

Smith Micro Software

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Smith Micro Software are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, Smith Micro demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Aware Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aware Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Smith Micro and Aware

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

The idea behind Smith Micro Software and Aware Inc 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.