Correlation Between Ametek and Smith AO
Can any of the company-specific risk be diversified away by investing in both Ametek and Smith AO 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 Ametek and Smith AO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ametek Inc and Smith AO, you can compare the effects of market volatilities on Ametek and Smith AO 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 Ametek with a short position of Smith AO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ametek and Smith AO.
Diversification Opportunities for Ametek and Smith AO
Very poor diversification
The 3 months correlation between Ametek and Smith is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Ametek Inc and Smith AO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smith AO and Ametek 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 Ametek Inc are associated (or correlated) with Smith AO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smith AO has no effect on the direction of Ametek i.e., Ametek and Smith AO go up and down completely randomly.
Pair Corralation between Ametek and Smith AO
Considering the 90-day investment horizon Ametek is expected to generate 1.17 times less return on investment than Smith AO. But when comparing it to its historical volatility, Ametek Inc is 1.39 times less risky than Smith AO. It trades about 0.06 of its potential returns per unit of risk. Smith AO is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 6,080 in Smith AO on December 30, 2023 and sell it today you would earn a total of 2,866 from holding Smith AO or generate 47.14% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Ametek Inc vs. Smith AO
Performance |
Timeline |
Ametek Inc |
Smith AO |
Ametek and Smith AO Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Ametek and Smith AO
The main advantage of trading using opposite Ametek and Smith AO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ametek position performs unexpectedly, Smith AO 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 AO will offset losses from the drop in Smith AO's long position.Ametek vs. Barnes Group | Ametek vs. Babcock Wilcox Enterprises | Ametek vs. Crane Company | Ametek vs. Hillenbrand |
Smith AO vs. Barnes Group | Smith AO vs. Babcock Wilcox Enterprises | Smith AO vs. Crane Company | Smith AO vs. General Electric |
Check out your portfolio center.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 AI Investment Finder module to use AI to screen and filter profitable investment opportunities.
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