Correlation Between National Beverage and DS Smith
Can any of the company-specific risk be diversified away by investing in both National Beverage and DS Smith 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 National Beverage and DS Smith into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Beverage Corp and DS Smith PLC, you can compare the effects of market volatilities on National Beverage and DS Smith 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 National Beverage with a short position of DS Smith. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Beverage and DS Smith.
Diversification Opportunities for National Beverage and DS Smith
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between National and SMDS is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and DS Smith PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DS Smith PLC and National Beverage 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 National Beverage Corp are associated (or correlated) with DS Smith. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DS Smith PLC has no effect on the direction of National Beverage i.e., National Beverage and DS Smith go up and down completely randomly.
Pair Corralation between National Beverage and DS Smith
Assuming the 90 days trading horizon National Beverage is expected to generate 2.98 times less return on investment than DS Smith. In addition to that, National Beverage is 2.14 times more volatile than DS Smith PLC. It trades about 0.01 of its total potential returns per unit of risk. DS Smith PLC is currently generating about 0.08 per unit of volatility. If you would invest 27,209 in DS Smith PLC on September 28, 2024 and sell it today you would earn a total of 27,041 from holding DS Smith PLC or generate 99.38% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 86.69% |
Values | Daily Returns |
National Beverage Corp vs. DS Smith PLC
Performance |
Timeline |
National Beverage Corp |
DS Smith PLC |
National Beverage and DS Smith Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with National Beverage and DS Smith
The main advantage of trading using opposite National Beverage and DS Smith positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Beverage position performs unexpectedly, DS Smith 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 DS Smith will offset losses from the drop in DS Smith's long position.National Beverage vs. Uniper SE | ||
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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