Correlation Between Strats SM and B Riley

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

By analyzing existing cross correlation between Strats SM Trust and B Riley Financial, you can compare the effects of market volatilities on Strats SM and B Riley 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 Strats SM with a short position of B Riley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strats SM and B Riley.

Diversification Opportunities for Strats SM and B Riley

0.17

Correlation Coefficient

Strats SM  B Riley

Average diversification

The 3 months correlation between Strats and RILYZ is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Strats SM Trust and B Riley Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on B Riley Financial and Strats SM 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 Strats SM Trust are associated (or correlated) with B Riley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of B Riley Financial has no effect on the direction of Strats SM i.e., Strats SM and B Riley go up and down completely randomly.

Pair Corralation between Strats SM and B Riley

Considering the 90-day investment horizon Strats SM Trust is expected to generate 0.12 times more return on investment than B Riley. However, Strats SM Trust is 8.53 times less risky than B Riley. It trades about 0.01 of its potential returns per unit of risk. B Riley Financial is currently generating about 0.0 per unit of risk. If you would invest  2,494  in Strats SM Trust on September 16, 2024 and sell it today you would earn a total of  6.00  from holding Strats SM Trust or generate 0.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.92%
Values	Daily Returns

Strats SM Trust  vs.  B Riley Financial

Strats SM Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Strats SM Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward-looking indicators, Strats SM is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

B Riley Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days B Riley Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, B Riley is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Strats SM and B Riley

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

The idea behind Strats SM Trust and B Riley Financial 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.