Correlation Between Century Communities and Smith Wesson

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

By analyzing existing cross correlation between Century Communities and Smith Wesson Brands, you can compare the effects of market volatilities on Century Communities and Smith Wesson 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 Century Communities with a short position of Smith Wesson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Century Communities and Smith Wesson.

Diversification Opportunities for Century Communities and Smith Wesson

-0.62

Correlation Coefficient

Century Communities  Smith Wesson

Excellent diversification

The 3 months correlation between Century and Smith is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Century Communities and Smith Wesson Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smith Wesson Brands and Century Communities 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 Century Communities are associated (or correlated) with Smith Wesson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smith Wesson Brands has no effect on the direction of Century Communities i.e., Century Communities and Smith Wesson go up and down completely randomly.

Pair Corralation between Century Communities and Smith Wesson

Considering the 90-day investment horizon Century Communities is expected to generate 0.89 times more return on investment than Smith Wesson. However, Century Communities is 1.12 times less risky than Smith Wesson. It trades about 0.05 of its potential returns per unit of risk. Smith Wesson Brands is currently generating about -0.07 per unit of risk. If you would invest  5,433  in Century Communities on May 5, 2025 and sell it today you would earn a total of  338.00  from holding Century Communities or generate 6.22% return on investment over 90 days.

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

Century Communities  vs.  Smith Wesson Brands

Century Communities

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Century Communities are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady fundamental indicators, Century Communities may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Smith Wesson Brands

Risk-Adjusted Performance

Very Weak

Over the last 90 days Smith Wesson Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Century Communities and Smith Wesson

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

The idea behind Century Communities and Smith Wesson Brands 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.