Correlation Between Smith Douglas and Live Ventures

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

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

Diversification Opportunities for Smith Douglas and Live Ventures

0.71

Correlation Coefficient

Smith Douglas  Live Ventures

Poor diversification

The 3 months correlation between Smith and Live is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Smith Douglas Homes and Live Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Live Ventures and Smith Douglas 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 Smith Douglas Homes are associated (or correlated) with Live Ventures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Live Ventures has no effect on the direction of Smith Douglas i.e., Smith Douglas and Live Ventures go up and down completely randomly.

Pair Corralation between Smith Douglas and Live Ventures

Given the investment horizon of 90 days Smith Douglas Homes is expected to under-perform the Live Ventures. But the stock apears to be less risky and, when comparing its historical volatility, Smith Douglas Homes is 2.03 times less risky than Live Ventures. The stock trades about -0.36 of its potential returns per unit of risk. The Live Ventures is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,000.00  in Live Ventures on September 23, 2024 and sell it today you would earn a total of  30.00  from holding Live Ventures or generate 3.0% return on investment over 90 days.

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

Smith Douglas Homes  vs.  Live Ventures

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.

Live Ventures

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Live Ventures has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic 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 Smith Douglas and Live Ventures

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

The idea behind Smith Douglas Homes and Live Ventures 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.