Correlation Between 49327M3E2 and Smith Douglas

Can any of the company-specific risk be diversified away by investing in both 49327M3E2 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 49327M3E2 and Smith Douglas into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KEY 415 08 AUG 25 and Smith Douglas Homes, you can compare the effects of market volatilities on 49327M3E2 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 49327M3E2 with a short position of Smith Douglas. Check out your portfolio center. Please also check ongoing floating volatility patterns of 49327M3E2 and Smith Douglas.

Diversification Opportunities for 49327M3E2 and Smith Douglas

0.31

Correlation Coefficient

49327M3E2  Smith Douglas

Weak diversification

The 3 months correlation between 49327M3E2 and Smith is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding KEY 415 08 AUG 25 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 49327M3E2 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 KEY 415 08 AUG 25 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 49327M3E2 i.e., 49327M3E2 and Smith Douglas go up and down completely randomly.

Pair Corralation between 49327M3E2 and Smith Douglas

Assuming the 90 days trading horizon 49327M3E2 is expected to generate 11.63 times less return on investment than Smith Douglas. But when comparing it to its historical volatility, KEY 415 08 AUG 25 is 12.3 times less risky than Smith Douglas. It trades about 0.04 of its potential returns per unit of risk. Smith Douglas Homes is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,400  in Smith Douglas Homes on September 25, 2024 and sell it today you would earn a total of  348.50  from holding Smith Douglas Homes or generate 14.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.76%
Values	Daily Returns

KEY 415 08 AUG 25  vs.  Smith Douglas Homes

KEY 415 08

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KEY 415 08 AUG 25 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 49327M3E2 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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 inconsistent performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with 49327M3E2 and Smith Douglas

The main advantage of trading using opposite 49327M3E2 and Smith Douglas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 49327M3E2 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 KEY 415 08 AUG 25 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.

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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.