Correlation Between Smartsheet and Global Business

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

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

Diversification Opportunities for Smartsheet and Global Business

0.88

Correlation Coefficient

Smartsheet  Global Business

Very poor diversification

The 3 months correlation between Smartsheet and Global is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Smartsheet and Global Business Travel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Business Travel and Smartsheet 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 Smartsheet are associated (or correlated) with Global Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Business Travel has no effect on the direction of Smartsheet i.e., Smartsheet and Global Business go up and down completely randomly.

Pair Corralation between Smartsheet and Global Business

Given the investment horizon of 90 days Smartsheet is expected to generate 1.33 times less return on investment than Global Business. But when comparing it to its historical volatility, Smartsheet is 1.43 times less risky than Global Business. It trades about 0.19 of its potential returns per unit of risk. Global Business Travel is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  654.00  in Global Business Travel on August 11, 2024 and sell it today you would earn a total of  172.00  from holding Global Business Travel or generate 26.3% return on investment over 90 days.

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

Smartsheet  vs.  Global Business Travel

Smartsheet

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Smartsheet are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Smartsheet reported solid returns over the last few months and may actually be approaching a breakup point.

Global Business Travel

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global Business Travel are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Global Business reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Smartsheet and Global Business

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

The idea behind Smartsheet and Global Business Travel 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.