Correlation Between Salee Industry and Smart Concrete

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

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

Diversification Opportunities for Salee Industry and Smart Concrete

0.78

Correlation Coefficient

Salee Industry  Smart Concrete

Poor diversification

The 3 months correlation between Salee and Smart is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Salee Industry Public and Smart Concrete Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smart Concrete Public and Salee Industry 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 Salee Industry Public are associated (or correlated) with Smart Concrete. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smart Concrete Public has no effect on the direction of Salee Industry i.e., Salee Industry and Smart Concrete go up and down completely randomly.

Pair Corralation between Salee Industry and Smart Concrete

Assuming the 90 days trading horizon Salee Industry Public is expected to under-perform the Smart Concrete. In addition to that, Salee Industry is 2.01 times more volatile than Smart Concrete Public. It trades about -0.13 of its total potential returns per unit of risk. Smart Concrete Public is currently generating about -0.1 per unit of volatility. If you would invest  84.00  in Smart Concrete Public on September 15, 2024 and sell it today you would lose (8.00) from holding Smart Concrete Public or give up 9.52% of portfolio value over 90 days.

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

Salee Industry Public  vs.  Smart Concrete Public

Salee Industry Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Salee Industry Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Smart Concrete Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Smart Concrete Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Salee Industry and Smart Concrete

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

The idea behind Salee Industry Public and Smart Concrete Public 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.