Correlation Between Smithson Investment and Broadridge Financial

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

By analyzing existing cross correlation between Smithson Investment Trust and Broadridge Financial Solutions, you can compare the effects of market volatilities on Smithson Investment and Broadridge Financial 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 Smithson Investment with a short position of Broadridge Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smithson Investment and Broadridge Financial.

Diversification Opportunities for Smithson Investment and Broadridge Financial

0.91

Correlation Coefficient

Smithson Investment  Broadridge Financial

Almost no diversification

The 3 months correlation between Smithson and Broadridge is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Smithson Investment Trust and Broadridge Financial Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadridge Financial and Smithson Investment 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 Smithson Investment Trust are associated (or correlated) with Broadridge Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broadridge Financial has no effect on the direction of Smithson Investment i.e., Smithson Investment and Broadridge Financial go up and down completely randomly.

Pair Corralation between Smithson Investment and Broadridge Financial

Assuming the 90 days trading horizon Smithson Investment is expected to generate 1.68 times less return on investment than Broadridge Financial. In addition to that, Smithson Investment is 1.23 times more volatile than Broadridge Financial Solutions. It trades about 0.02 of its total potential returns per unit of risk. Broadridge Financial Solutions is currently generating about 0.05 per unit of volatility. If you would invest  19,948  in Broadridge Financial Solutions on October 9, 2024 and sell it today you would earn a total of  2,809  from holding Broadridge Financial Solutions or generate 14.08% return on investment over 90 days.

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

Smithson Investment Trust  vs.  Broadridge Financial Solutions

Smithson Investment Trust

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Smithson Investment Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Smithson Investment is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Broadridge Financial

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Broadridge Financial Solutions are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Broadridge Financial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Smithson Investment and Broadridge Financial

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

The idea behind Smithson Investment Trust and Broadridge Financial 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.