Correlation Between Smart Global and Alpha

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

By analyzing existing cross correlation between Smart Global Holdings and Alpha and Omega, you can compare the effects of market volatilities on Smart Global and Alpha 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 Smart Global with a short position of Alpha. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smart Global and Alpha.

Diversification Opportunities for Smart Global and Alpha

-0.08

Correlation Coefficient

Smart Global  Alpha

Good diversification

The 3 months correlation between Smart and Alpha is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Smart Global Holdings and Alpha and Omega in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha and Omega and Smart Global 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 Smart Global Holdings are associated (or correlated) with Alpha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha and Omega has no effect on the direction of Smart Global i.e., Smart Global and Alpha go up and down completely randomly.

Pair Corralation between Smart Global and Alpha

Considering the 90-day investment horizon Smart Global Holdings is expected to under-perform the Alpha. In addition to that, Smart Global is 1.08 times more volatile than Alpha and Omega. It trades about -0.12 of its total potential returns per unit of risk. Alpha and Omega is currently generating about 0.16 per unit of volatility. If you would invest  2,158  in Alpha and Omega on February 23, 2024 and sell it today you would earn a total of  582.00  from holding Alpha and Omega or generate 26.97% return on investment over 90 days.

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

Smart Global Holdings  vs.  Alpha and Omega

Smart Global Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Smart Global Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, Smart Global is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Alpha and Omega

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alpha and Omega are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Alpha disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Smart Global and Alpha

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

The idea behind Smart Global Holdings and Alpha and Omega 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.