Correlation Between SM Investments and Dillards

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

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

Diversification Opportunities for SM Investments and Dillards

0.33

Correlation Coefficient

SM Investments  Dillards

Weak diversification

The 3 months correlation between SVTMF and Dillards is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding SM Investments and Dillards in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dillards and SM Investments 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 SM Investments are associated (or correlated) with Dillards. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dillards has no effect on the direction of SM Investments i.e., SM Investments and Dillards go up and down completely randomly.

Pair Corralation between SM Investments and Dillards

Assuming the 90 days horizon SM Investments is expected to generate 3.04 times less return on investment than Dillards. But when comparing it to its historical volatility, SM Investments is 4.1 times less risky than Dillards. It trades about 0.22 of its potential returns per unit of risk. Dillards is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  41,981  in Dillards on October 5, 2024 and sell it today you would earn a total of  3,090  from holding Dillards or generate 7.36% return on investment over 90 days.

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

SM Investments  vs.  Dillards

SM Investments

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SM Investments are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady primary indicators, SM Investments reported solid returns over the last few months and may actually be approaching a breakup point.

Dillards

Risk-Adjusted Performance

13 of 100

Good

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

Pair Trading with SM Investments and Dillards

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

The idea behind SM Investments and Dillards 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.