Correlation Between Smead Funds and Smead Value

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

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

Diversification Opportunities for Smead Funds and Smead Value

0.51

Correlation Coefficient

Smead Funds  Smead Value

Very weak diversification

The 3 months correlation between Smead and SMEAD is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Smead Funds Trust and Smead Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smead Value Fund and Smead Funds 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 Funds Trust are associated (or correlated) with Smead Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smead Value Fund has no effect on the direction of Smead Funds i.e., Smead Funds and Smead Value go up and down completely randomly.

Pair Corralation between Smead Funds and Smead Value

Assuming the 90 days horizon Smead Funds Trust is expected to under-perform the Smead Value. In addition to that, Smead Funds is 1.27 times more volatile than Smead Value Fund. It trades about -0.04 of its total potential returns per unit of risk. Smead Value Fund is currently generating about 0.05 per unit of volatility. If you would invest  8,425  in Smead Value Fund on September 4, 2024 and sell it today you would earn a total of  180.00  from holding Smead Value Fund or generate 2.14% return on investment over 90 days.

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

Smead Funds Trust  vs.  Smead Value Fund

Smead Funds Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Smead Funds Trust has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Smead Funds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Smead Value Fund

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Smead Value Fund are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking signals, Smead Value is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Smead Funds and Smead Value

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

The idea behind Smead Funds Trust and Smead Value Fund 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.