Correlation Between SMX Public and ARC Document

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

By analyzing existing cross correlation between SMX Public Limited and ARC Document Solutions, you can compare the effects of market volatilities on SMX Public and ARC Document 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 SMX Public with a short position of ARC Document. Check out your portfolio center. Please also check ongoing floating volatility patterns of SMX Public and ARC Document.

Diversification Opportunities for SMX Public and ARC Document

-0.39

Correlation Coefficient

SMX Public  ARC Document

Very good diversification

The 3 months correlation between SMX and ARC is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding SMX Public Limited and ARC Document Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARC Document Solutions and SMX Public 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 SMX Public Limited are associated (or correlated) with ARC Document. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARC Document Solutions has no effect on the direction of SMX Public i.e., SMX Public and ARC Document go up and down completely randomly.

Pair Corralation between SMX Public and ARC Document

Considering the 90-day investment horizon SMX Public Limited is expected to generate 63.99 times more return on investment than ARC Document. However, SMX Public is 63.99 times more volatile than ARC Document Solutions. It trades about 0.12 of its potential returns per unit of risk. ARC Document Solutions is currently generating about 0.04 per unit of risk. If you would invest  22,330  in SMX Public Limited on September 3, 2024 and sell it today you would lose (22,309) from holding SMX Public Limited or give up 99.91% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.99%
Values	Daily Returns

SMX Public Limited  vs.  ARC Document Solutions

SMX Public Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SMX Public Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

ARC Document Solutions

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days ARC Document Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, ARC Document is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SMX Public and ARC Document

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

The idea behind SMX Public Limited and ARC Document Solutions 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.