Correlation Between SMC Corp and Straumann Holding

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

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

Diversification Opportunities for SMC Corp and Straumann Holding

0.32

Correlation Coefficient

SMC Corp  Straumann Holding

Weak diversification

The 3 months correlation between SMC and Straumann is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding SMC Corp and Straumann Holding AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Straumann Holding and SMC 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 SMC Corp are associated (or correlated) with Straumann Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Straumann Holding has no effect on the direction of SMC Corp i.e., SMC Corp and Straumann Holding go up and down completely randomly.

Pair Corralation between SMC Corp and Straumann Holding

Assuming the 90 days horizon SMC Corp is expected to generate 4.23 times less return on investment than Straumann Holding. But when comparing it to its historical volatility, SMC Corp is 1.71 times less risky than Straumann Holding. It trades about 0.01 of its potential returns per unit of risk. Straumann Holding AG is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  11,553  in Straumann Holding AG on September 24, 2024 and sell it today you would earn a total of  1,089  from holding Straumann Holding AG or generate 9.43% return on investment over 90 days.

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

SMC Corp  vs.  Straumann Holding AG

SMC Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SMC Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, SMC Corp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Straumann Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Straumann Holding AG 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 technical 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 SMC Corp and Straumann Holding

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

The idea behind SMC Corp and Straumann Holding AG 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 CEOs Directory module to screen CEOs from public companies around the world.