Correlation Between SMC Corp and Rockwell Automation

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

By analyzing existing cross correlation between SMC Corp Japan and Rockwell Automation, you can compare the effects of market volatilities on SMC Corp and Rockwell Automation 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 SMC Corp with a short position of Rockwell Automation. Check out your portfolio center. Please also check ongoing floating volatility patterns of SMC Corp and Rockwell Automation.

Diversification Opportunities for SMC Corp and Rockwell Automation

0.13

Correlation Coefficient

SMC Corp  Rockwell Automation

Average diversification

The 3 months correlation between SMC and Rockwell is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding SMC Corp Japan and Rockwell Automation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rockwell Automation and SMC Corp 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 SMC Corp Japan are associated (or correlated) with Rockwell Automation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rockwell Automation has no effect on the direction of SMC Corp i.e., SMC Corp and Rockwell Automation go up and down completely randomly.

Pair Corralation between SMC Corp and Rockwell Automation

Assuming the 90 days horizon SMC Corp is expected to generate 11.9 times less return on investment than Rockwell Automation. But when comparing it to its historical volatility, SMC Corp Japan is 1.1 times less risky than Rockwell Automation. It trades about 0.0 of its potential returns per unit of risk. Rockwell Automation is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  25,345  in Rockwell Automation on August 26, 2024 and sell it today you would earn a total of  3,741  from holding Rockwell Automation or generate 14.76% return on investment over 90 days.

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

SMC Corp Japan  vs.  Rockwell Automation

SMC Corp Japan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SMC Corp Japan has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, SMC Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Rockwell Automation

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rockwell Automation are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal basic indicators, Rockwell Automation may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with SMC Corp and Rockwell Automation

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

The idea behind SMC Corp Japan and Rockwell Automation 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.

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 Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.