Correlation Between DS Smith and Precision Drilling
Can any of the company-specific risk be diversified away by investing in both DS Smith and Precision Drilling 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 DS Smith and Precision Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DS Smith PLC and Precision Drilling, you can compare the effects of market volatilities on DS Smith and Precision Drilling 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 DS Smith with a short position of Precision Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of DS Smith and Precision Drilling.
Diversification Opportunities for DS Smith and Precision Drilling
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between DITHF and Precision is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding DS Smith PLC and Precision Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precision Drilling and DS Smith 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 DS Smith PLC are associated (or correlated) with Precision Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Precision Drilling has no effect on the direction of DS Smith i.e., DS Smith and Precision Drilling go up and down completely randomly.
Pair Corralation between DS Smith and Precision Drilling
Assuming the 90 days horizon DS Smith PLC is expected to generate 1.27 times more return on investment than Precision Drilling. However, DS Smith is 1.27 times more volatile than Precision Drilling. It trades about 0.07 of its potential returns per unit of risk. Precision Drilling is currently generating about 0.0 per unit of risk. If you would invest 359.00 in DS Smith PLC on September 13, 2024 and sell it today you would earn a total of 372.00 from holding DS Smith PLC or generate 103.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 88.06% |
| Values | Daily Returns |
DS Smith PLC vs. Precision Drilling
Performance |
| Timeline |
| DS Smith PLC |
| Precision Drilling |
DS Smith and Precision Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DS Smith and Precision Drilling
The main advantage of trading using opposite DS Smith and Precision Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DS Smith position performs unexpectedly, Precision Drilling 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 Precision Drilling will offset losses from the drop in Precision Drilling's long position.| DS Smith vs. Precision Drilling | DS Smith vs. Bt Brands | DS Smith vs. Delek Drilling | DS Smith vs. Dine Brands Global |
| Precision Drilling vs. Helmerich and Payne | Precision Drilling vs. Nabors Industries | Precision Drilling vs. Seadrill Limited | Precision Drilling vs. Patterson UTI Energy |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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