Correlation Between AJ Bell and Smithson Investment

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

By analyzing existing cross correlation between AJ Bell plc and Smithson Investment Trust, you can compare the effects of market volatilities on AJ Bell and Smithson Investment 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 AJ Bell with a short position of Smithson Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of AJ Bell and Smithson Investment.

Diversification Opportunities for AJ Bell and Smithson Investment

0.8

Correlation Coefficient

AJ Bell  Smithson Investment

Very poor diversification

The 3 months correlation between AJB and Smithson is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding AJ Bell plc and Smithson Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smithson Investment Trust and AJ Bell 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 AJ Bell plc are associated (or correlated) with Smithson Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smithson Investment Trust has no effect on the direction of AJ Bell i.e., AJ Bell and Smithson Investment go up and down completely randomly.

Pair Corralation between AJ Bell and Smithson Investment

Assuming the 90 days trading horizon AJ Bell plc is expected to generate 1.95 times more return on investment than Smithson Investment. However, AJ Bell is 1.95 times more volatile than Smithson Investment Trust. It trades about 0.23 of its potential returns per unit of risk. Smithson Investment Trust is currently generating about 0.19 per unit of risk. If you would invest  41,741  in AJ Bell plc on April 24, 2025 and sell it today you would earn a total of  10,409  from holding AJ Bell plc or generate 24.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

AJ Bell plc  vs.  Smithson Investment Trust

AJ Bell plc

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AJ Bell plc are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, AJ Bell exhibited solid returns over the last few months and may actually be approaching a breakup point.

Smithson Investment Trust

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Smithson Investment Trust are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Smithson Investment may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with AJ Bell and Smithson Investment

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

The idea behind AJ Bell plc and Smithson Investment Trust 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..