Correlation Between Smarttech247 Group and Chemring Group

Can any of the company-specific risk be diversified away by investing in both Smarttech247 Group and Chemring Group 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 Smarttech247 Group and Chemring Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Smarttech247 Group PLC and Chemring Group PLC, you can compare the effects of market volatilities on Smarttech247 Group and Chemring Group 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 Smarttech247 Group with a short position of Chemring Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smarttech247 Group and Chemring Group.

Diversification Opportunities for Smarttech247 Group and Chemring Group

0.74

Correlation Coefficient

Smarttech247 Group  Chemring Group

Poor diversification

The 3 months correlation between Smarttech247 and Chemring is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Smarttech247 Group PLC and Chemring Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chemring Group PLC and Smarttech247 Group 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 Smarttech247 Group PLC are associated (or correlated) with Chemring Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chemring Group PLC has no effect on the direction of Smarttech247 Group i.e., Smarttech247 Group and Chemring Group go up and down completely randomly.

Pair Corralation between Smarttech247 Group and Chemring Group

Assuming the 90 days trading horizon Smarttech247 Group is expected to generate 1.92 times less return on investment than Chemring Group. In addition to that, Smarttech247 Group is 1.02 times more volatile than Chemring Group PLC. It trades about 0.16 of its total potential returns per unit of risk. Chemring Group PLC is currently generating about 0.3 per unit of volatility. If you would invest  38,150  in Chemring Group PLC on April 20, 2025 and sell it today you would earn a total of  17,150  from holding Chemring Group PLC or generate 44.95% return on investment over 90 days.

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

Smarttech247 Group PLC  vs.  Chemring Group PLC

Smarttech247 Group PLC

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Smarttech247 Group PLC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Smarttech247 Group unveiled solid returns over the last few months and may actually be approaching a breakup point.

Chemring Group PLC

Risk-Adjusted Performance

Solid

Over the last 90 days Chemring Group PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather weak technical and fundamental indicators, Chemring Group exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Smarttech247 Group and Chemring Group

The main advantage of trading using opposite Smarttech247 Group and Chemring Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smarttech247 Group position performs unexpectedly, Chemring Group 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 Chemring Group will offset losses from the drop in Chemring Group's long position.

The idea behind Smarttech247 Group PLC and Chemring Group PLC 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 Transaction History module to view history of all your transactions and understand their impact on performance.