Correlation Between Cactus and SMG Industries

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

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

Diversification Opportunities for Cactus and SMG Industries

-0.01

Correlation Coefficient

Cactus  SMG Industries

Good diversification

The 3 months correlation between Cactus and SMG is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Cactus Inc and SMG Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMG Industries and Cactus 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 Cactus Inc are associated (or correlated) with SMG Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMG Industries has no effect on the direction of Cactus i.e., Cactus and SMG Industries go up and down completely randomly.

Pair Corralation between Cactus and SMG Industries

Considering the 90-day investment horizon Cactus Inc is expected to generate 0.14 times more return on investment than SMG Industries. However, Cactus Inc is 7.37 times less risky than SMG Industries. It trades about 0.05 of its potential returns per unit of risk. SMG Industries is currently generating about -0.01 per unit of risk. If you would invest  5,706  in Cactus Inc on October 20, 2024 and sell it today you would earn a total of  657.00  from holding Cactus Inc or generate 11.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.21%
Values	Daily Returns

Cactus Inc  vs.  SMG Industries

Cactus Inc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cactus Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical indicators, Cactus may actually be approaching a critical reversion point that can send shares even higher in February 2025.

SMG Industries

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SMG Industries are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical and fundamental indicators, SMG Industries demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cactus and SMG Industries

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

The idea behind Cactus Inc and SMG Industries 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.