Correlation Between System1 and SMX Public

Can any of the company-specific risk be diversified away by investing in both System1 and SMX Public 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 System1 and SMX Public into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between System1 and SMX Public Limited, you can compare the effects of market volatilities on System1 and SMX Public 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 System1 with a short position of SMX Public. Check out your portfolio center. Please also check ongoing floating volatility patterns of System1 and SMX Public.

Diversification Opportunities for System1 and SMX Public

0.79

Correlation Coefficient

System1  SMX Public

Poor diversification

The 3 months correlation between System1 and SMX is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding System1 and SMX Public Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMX Public Limited and System1 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 System1 are associated (or correlated) with SMX Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMX Public Limited has no effect on the direction of System1 i.e., System1 and SMX Public go up and down completely randomly.

Pair Corralation between System1 and SMX Public

Considering the 90-day investment horizon System1 is expected to generate 0.13 times more return on investment than SMX Public. However, System1 is 7.46 times less risky than SMX Public. It trades about -0.09 of its potential returns per unit of risk. SMX Public Limited is currently generating about -0.02 per unit of risk. If you would invest  120.00  in System1 on September 11, 2024 and sell it today you would lose (26.00) from holding System1 or give up 21.67% of portfolio value over 90 days.

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

System1  vs.  SMX Public Limited

System1

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days System1 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the exchange-traded fund private investors.

SMX Public Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SMX Public Limited 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 primary indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with System1 and SMX Public

The main advantage of trading using opposite System1 and SMX Public positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if System1 position performs unexpectedly, SMX Public 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 SMX Public will offset losses from the drop in SMX Public's long position.

The idea behind System1 and SMX Public Limited 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.