Correlation Between Molson Coors and Smith Douglas

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

By analyzing existing cross correlation between Molson Coors Brewing and Smith Douglas Homes, you can compare the effects of market volatilities on Molson Coors and Smith Douglas 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 Molson Coors with a short position of Smith Douglas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Molson Coors and Smith Douglas.

Diversification Opportunities for Molson Coors and Smith Douglas

-0.72

Correlation Coefficient

Molson Coors  Smith Douglas

Pay attention - limited upside

The 3 months correlation between Molson and Smith is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Molson Coors Brewing and Smith Douglas Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smith Douglas Homes and Molson Coors 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 Molson Coors Brewing are associated (or correlated) with Smith Douglas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smith Douglas Homes has no effect on the direction of Molson Coors i.e., Molson Coors and Smith Douglas go up and down completely randomly.

Pair Corralation between Molson Coors and Smith Douglas

Considering the 90-day investment horizon Molson Coors Brewing is expected to under-perform the Smith Douglas. But the stock apears to be less risky and, when comparing its historical volatility, Molson Coors Brewing is 3.32 times less risky than Smith Douglas. The stock trades about -0.09 of its potential returns per unit of risk. The Smith Douglas Homes is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  3,052  in Smith Douglas Homes on September 16, 2024 and sell it today you would earn a total of  185.00  from holding Smith Douglas Homes or generate 6.06% return on investment over 90 days.

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

Molson Coors Brewing  vs.  Smith Douglas Homes

Molson Coors Brewing

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Molson Coors Brewing are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Molson Coors may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Smith Douglas Homes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Smith Douglas Homes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Molson Coors and Smith Douglas

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

The idea behind Molson Coors Brewing and Smith Douglas Homes 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.

Check out your portfolio center.

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.