Correlation Between Trane Technologies and Smith Midland

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

By analyzing existing cross correlation between Trane Technologies plc and Smith Midland Corp, you can compare the effects of market volatilities on Trane Technologies and Smith Midland 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 Trane Technologies with a short position of Smith Midland. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trane Technologies and Smith Midland.

Diversification Opportunities for Trane Technologies and Smith Midland

0.79

Correlation Coefficient

Trane Technologies  Smith Midland

Poor diversification

The 3 months correlation between Trane and Smith is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Trane Technologies plc and Smith Midland Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smith Midland Corp and Trane Technologies 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 Trane Technologies plc are associated (or correlated) with Smith Midland. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smith Midland Corp has no effect on the direction of Trane Technologies i.e., Trane Technologies and Smith Midland go up and down completely randomly.

Pair Corralation between Trane Technologies and Smith Midland

Allowing for the 90-day total investment horizon Trane Technologies plc is expected to generate 0.64 times more return on investment than Smith Midland. However, Trane Technologies plc is 1.55 times less risky than Smith Midland. It trades about -0.01 of its potential returns per unit of risk. Smith Midland Corp is currently generating about -0.15 per unit of risk. If you would invest  37,250  in Trane Technologies plc on December 27, 2024 and sell it today you would lose (850.00) from holding Trane Technologies plc or give up 2.28% of portfolio value over 90 days.

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

Trane Technologies plc  vs.  Smith Midland Corp

Trane Technologies plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Trane Technologies plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Trane Technologies is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Smith Midland Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Smith Midland Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Trane Technologies and Smith Midland

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

The idea behind Trane Technologies plc and Smith Midland Corp 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.