Correlation Between Smith AO and Ballard Power

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

By analyzing existing cross correlation between Smith AO and Ballard Power Systems, you can compare the effects of market volatilities on Smith AO and Ballard Power 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 Smith AO with a short position of Ballard Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smith AO and Ballard Power.

Diversification Opportunities for Smith AO and Ballard Power

-0.53

Correlation Coefficient

Smith AO  Ballard Power

Excellent diversification

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

Pair Corralation between Smith AO and Ballard Power

Considering the 90-day investment horizon Smith AO is expected to generate 0.18 times more return on investment than Ballard Power. However, Smith AO is 5.58 times less risky than Ballard Power. It trades about 0.0 of its potential returns per unit of risk. Ballard Power Systems is currently generating about -0.02 per unit of risk. If you would invest  8,804  in Smith AO on January 25, 2024 and sell it today you would lose (12.00) from holding Smith AO or give up 0.14% of portfolio value over 90 days.

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

Smith AO  vs.  Ballard Power Systems

Smith AO

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Smith AO are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Smith AO may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Ballard Power Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ballard Power Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Even with abnormal performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in May 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Smith AO and Ballard Power

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

The idea behind Smith AO and Ballard Power Systems 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.