Correlation Between Glaukos Corp and Smith Nephew

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

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

Diversification Opportunities for Glaukos Corp and Smith Nephew

-0.86

Correlation Coefficient

Glaukos Corp  Smith Nephew

Pay attention - limited upside

The 3 months correlation between Glaukos and Smith is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Glaukos Corp and Smith Nephew plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smith Nephew plc and Glaukos Corp 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 Glaukos Corp are associated (or correlated) with Smith Nephew. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smith Nephew plc has no effect on the direction of Glaukos Corp i.e., Glaukos Corp and Smith Nephew go up and down completely randomly.

Pair Corralation between Glaukos Corp and Smith Nephew

Given the investment horizon of 90 days Glaukos Corp is expected to generate 0.78 times more return on investment than Smith Nephew. However, Glaukos Corp is 1.28 times less risky than Smith Nephew. It trades about 0.06 of its potential returns per unit of risk. Smith Nephew plc is currently generating about -0.08 per unit of risk. If you would invest  12,627  in Glaukos Corp on September 12, 2024 and sell it today you would earn a total of  1,011  from holding Glaukos Corp or generate 8.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Glaukos Corp  vs.  Smith Nephew plc

Glaukos Corp

Risk-Adjusted Performance

4 of 100

Modest

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

Smith Nephew plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Smith Nephew plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak 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.

Pair Trading with Glaukos Corp and Smith Nephew

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

The idea behind Glaukos Corp and Smith Nephew plc 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.