Correlation Between Smead Value and Fm Investments

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

By analyzing existing cross correlation between Smead Value Fund and Fm Investments Large, you can compare the effects of market volatilities on Smead Value and Fm Investments 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 Smead Value with a short position of Fm Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smead Value and Fm Investments.

Diversification Opportunities for Smead Value and Fm Investments

-0.59

Correlation Coefficient

Smead Value  Fm Investments

Excellent diversification

The 3 months correlation between Smead and IAFLX is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Smead Value Fund and Fm Investments Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fm Investments Large and Smead Value 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 Smead Value Fund are associated (or correlated) with Fm Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fm Investments Large has no effect on the direction of Smead Value i.e., Smead Value and Fm Investments go up and down completely randomly.

Pair Corralation between Smead Value and Fm Investments

Assuming the 90 days horizon Smead Value Fund is expected to under-perform the Fm Investments. But the mutual fund apears to be less risky and, when comparing its historical volatility, Smead Value Fund is 1.23 times less risky than Fm Investments. The mutual fund trades about -0.12 of its potential returns per unit of risk. The Fm Investments Large is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,791  in Fm Investments Large on September 28, 2024 and sell it today you would earn a total of  210.00  from holding Fm Investments Large or generate 11.73% return on investment over 90 days.

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

Smead Value Fund  vs.  Fm Investments Large

Smead Value Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Smead Value Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Fm Investments Large

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fm Investments Large are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Fm Investments may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Smead Value and Fm Investments

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

The idea behind Smead Value Fund and Fm Investments Large 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.