Correlation Between Boot Barn and Smith Douglas

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

By analyzing existing cross correlation between Boot Barn Holdings and Smith Douglas Homes, you can compare the effects of market volatilities on Boot Barn and Smith Douglas 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 Boot Barn with a short position of Smith Douglas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boot Barn and Smith Douglas.

Diversification Opportunities for Boot Barn and Smith Douglas

0.26

Correlation Coefficient

Boot Barn  Smith Douglas

Modest diversification

The 3 months correlation between Boot and Smith is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Boot Barn Holdings and Smith Douglas Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smith Douglas Homes and Boot Barn 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 Boot Barn Holdings are associated (or correlated) with Smith Douglas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smith Douglas Homes has no effect on the direction of Boot Barn i.e., Boot Barn and Smith Douglas go up and down completely randomly.

Pair Corralation between Boot Barn and Smith Douglas

Given the investment horizon of 90 days Boot Barn Holdings is expected to generate 0.84 times more return on investment than Smith Douglas. However, Boot Barn Holdings is 1.19 times less risky than Smith Douglas. It trades about 0.19 of its potential returns per unit of risk. Smith Douglas Homes is currently generating about 0.01 per unit of risk. If you would invest  11,764  in Boot Barn Holdings on May 9, 2025 and sell it today you would earn a total of  5,070  from holding Boot Barn Holdings or generate 43.1% return on investment over 90 days.

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

Boot Barn Holdings  vs.  Smith Douglas Homes

Boot Barn Holdings

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Boot Barn Holdings are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Boot Barn unveiled solid returns over the last few months and may actually be approaching a breakup point.

Smith Douglas Homes

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Smith Douglas Homes are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, Smith Douglas is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Boot Barn and Smith Douglas

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

The idea behind Boot Barn Holdings and Smith Douglas Homes 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.