Correlation Between Smart For and Better Choice

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

By analyzing existing cross correlation between Smart for Life, and Better Choice, you can compare the effects of market volatilities on Smart For and Better Choice 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 Smart For with a short position of Better Choice. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smart For and Better Choice.

Diversification Opportunities for Smart For and Better Choice

0.28

Correlation Coefficient

Smart For  Better Choice

Modest diversification

The 3 months correlation between Smart and Better is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Smart for Life, and Better Choice in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Better Choice and Smart For 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 Smart for Life, are associated (or correlated) with Better Choice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Better Choice has no effect on the direction of Smart For i.e., Smart For and Better Choice go up and down completely randomly.

Pair Corralation between Smart For and Better Choice

Given the investment horizon of 90 days Smart for Life, is expected to under-perform the Better Choice. In addition to that, Smart For is 4.85 times more volatile than Better Choice. It trades about -0.74 of its total potential returns per unit of risk. Better Choice is currently generating about -0.02 per unit of volatility. If you would invest  275.00  in Better Choice on September 15, 2024 and sell it today you would lose (50.00) from holding Better Choice or give up 18.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	15.63%
Values	Daily Returns

Smart for Life,  vs.  Better Choice

Smart for Life,

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Smart for Life, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Better Choice

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Better Choice has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's basic 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 Smart For and Better Choice

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

The idea behind Smart for Life, and Better Choice 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.