Correlation Between Smith Douglas and Sphere Entertainment

Can any of the company-specific risk be diversified away by investing in both Smith Douglas and Sphere Entertainment 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 Sphere Entertainment 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 Sphere Entertainment Co, you can compare the effects of market volatilities on Smith Douglas and Sphere Entertainment 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 Sphere Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smith Douglas and Sphere Entertainment.

Diversification Opportunities for Smith Douglas and Sphere Entertainment

0.53

Correlation Coefficient

Smith Douglas  Sphere Entertainment

Very weak diversification

The 3 months correlation between Smith and Sphere is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Smith Douglas Homes and Sphere Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sphere Entertainment 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 Sphere Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sphere Entertainment has no effect on the direction of Smith Douglas i.e., Smith Douglas and Sphere Entertainment go up and down completely randomly.

Pair Corralation between Smith Douglas and Sphere Entertainment

Given the investment horizon of 90 days Smith Douglas Homes is expected to generate 1.08 times more return on investment than Sphere Entertainment. However, Smith Douglas is 1.08 times more volatile than Sphere Entertainment Co. It trades about -0.04 of its potential returns per unit of risk. Sphere Entertainment Co is currently generating about -0.04 per unit of risk. If you would invest  3,586  in Smith Douglas Homes on September 15, 2024 and sell it today you would lose (349.00) from holding Smith Douglas Homes or give up 9.73% of portfolio value over 90 days.

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

Smith Douglas Homes  vs.  Sphere Entertainment Co

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 latest weak performance, the Stock's technical indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Sphere Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sphere Entertainment Co has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest fragile performance, the Stock's technical indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Smith Douglas and Sphere Entertainment

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

The idea behind Smith Douglas Homes and Sphere Entertainment Co 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.