Correlation Between Xunlei and Smith Douglas

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

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

Diversification Opportunities for Xunlei and Smith Douglas

0.02

Correlation Coefficient

Xunlei  Smith Douglas

Significant diversification

The 3 months correlation between Xunlei and Smith is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Xunlei Ltd Adr 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 Xunlei 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 Xunlei Ltd Adr 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 Xunlei i.e., Xunlei and Smith Douglas go up and down completely randomly.

Pair Corralation between Xunlei and Smith Douglas

Given the investment horizon of 90 days Xunlei is expected to generate 1.93 times less return on investment than Smith Douglas. In addition to that, Xunlei is 1.09 times more volatile than Smith Douglas Homes. It trades about 0.02 of its total potential returns per unit of risk. Smith Douglas Homes is currently generating about 0.03 per unit of volatility. If you would invest  2,400  in Smith Douglas Homes on September 29, 2024 and sell it today you would earn a total of  318.00  from holding Smith Douglas Homes or generate 13.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	48.99%
Values	Daily Returns

Xunlei Ltd Adr  vs.  Smith Douglas Homes

Xunlei Ltd Adr

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Xunlei Ltd Adr are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Xunlei unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 Xunlei and Smith Douglas

The main advantage of trading using opposite Xunlei and Smith Douglas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xunlei 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 Xunlei Ltd Adr 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.