Correlation Between Domo and Smartsheet

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

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

Diversification Opportunities for Domo and Smartsheet

0.45

Correlation Coefficient

Domo  Smartsheet

Very weak diversification

The 3 months correlation between Domo and Smartsheet is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Domo Inc and Smartsheet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smartsheet and Domo 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 Domo Inc are associated (or correlated) with Smartsheet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smartsheet has no effect on the direction of Domo i.e., Domo and Smartsheet go up and down completely randomly.

Pair Corralation between Domo and Smartsheet

Given the investment horizon of 90 days Domo Inc is expected to generate 4.1 times more return on investment than Smartsheet. However, Domo is 4.1 times more volatile than Smartsheet. It trades about 0.06 of its potential returns per unit of risk. Smartsheet is currently generating about 0.18 per unit of risk. If you would invest  700.00  in Domo Inc on September 19, 2024 and sell it today you would earn a total of  69.00  from holding Domo Inc or generate 9.86% return on investment over 90 days.

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

Domo Inc  vs.  Smartsheet

Domo Inc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Domo Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal primary indicators, Domo displayed solid returns over the last few months and may actually be approaching a breakup point.

Smartsheet

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Smartsheet are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Smartsheet may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Domo and Smartsheet

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

The idea behind Domo Inc and Smartsheet 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.