Correlation Between Worley and SMG Industries

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

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

Diversification Opportunities for Worley and SMG Industries

0.65

Correlation Coefficient

Worley  SMG Industries

Poor diversification

The 3 months correlation between Worley and SMG is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Worley Limited and SMG Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMG Industries and Worley 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 Worley Limited 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 Worley i.e., Worley and SMG Industries go up and down completely randomly.

Pair Corralation between Worley and SMG Industries

Assuming the 90 days horizon Worley Limited is expected to generate 0.14 times more return on investment than SMG Industries. However, Worley Limited is 7.04 times less risky than SMG Industries. It trades about -0.01 of its potential returns per unit of risk. SMG Industries is currently generating about -0.01 per unit of risk. If you would invest  1,008  in Worley Limited on September 23, 2024 and sell it today you would lose (146.00) from holding Worley Limited or give up 14.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	81.93%
Values	Daily Returns

Worley Limited  vs.  SMG Industries

Worley Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Worley Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

SMG Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SMG Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Worley and SMG Industries

The main advantage of trading using opposite Worley and SMG Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Worley 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 Worley Limited 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 Stocks Directory module to find actively traded stocks across global markets.