Correlation Between Sphere Entertainment and Smith Douglas

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

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

Diversification Opportunities for Sphere Entertainment and Smith Douglas

0.53

Correlation Coefficient

Sphere Entertainment  Smith Douglas

Very weak diversification

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

Pair Corralation between Sphere Entertainment and Smith Douglas

Given the investment horizon of 90 days Sphere Entertainment Co is expected to under-perform the Smith Douglas. But the stock apears to be less risky and, when comparing its historical volatility, Sphere Entertainment Co is 1.08 times less risky than Smith Douglas. The stock trades about -0.04 of its potential returns per unit of risk. The Smith Douglas Homes is currently generating about -0.04 of returns per unit of risk over similar time horizon. 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

Sphere Entertainment Co  vs.  Smith Douglas Homes

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 conflicting 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.

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 uncertain 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.

Pair Trading with Sphere Entertainment and Smith Douglas

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

The idea behind Sphere Entertainment Co and Smith Douglas Homes 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.