Correlation Between Smith Nephew and Ainos

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

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

Diversification Opportunities for Smith Nephew and Ainos

0.62

Correlation Coefficient

Smith Nephew  Ainos

Poor diversification

The 3 months correlation between Smith and Ainos is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Smith Nephew plc and Ainos Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ainos Inc and Smith Nephew 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 Nephew plc are associated (or correlated) with Ainos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ainos Inc has no effect on the direction of Smith Nephew i.e., Smith Nephew and Ainos go up and down completely randomly.

Pair Corralation between Smith Nephew and Ainos

Assuming the 90 days horizon Smith Nephew plc is expected to under-perform the Ainos. But the pink sheet apears to be less risky and, when comparing its historical volatility, Smith Nephew plc is 14.45 times less risky than Ainos. The pink sheet trades about -0.05 of its potential returns per unit of risk. The Ainos Inc is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  7.99  in Ainos Inc on March 13, 2024 and sell it today you would lose (3.47) from holding Ainos Inc or give up 43.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	48.39%
Values	Daily Returns

Smith Nephew plc  vs.  Ainos Inc

Smith Nephew plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Smith Nephew plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Smith Nephew is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Ainos Inc

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Ainos Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly abnormal fundamental indicators, Ainos showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Smith Nephew and Ainos

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

The idea behind Smith Nephew plc and Ainos Inc 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.