Correlation Between DS Smith and Packaging Corp
Can any of the company-specific risk be diversified away by investing in both DS Smith and Packaging Corp 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 Packaging Corp 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 Packaging Corp of, you can compare the effects of market volatilities on DS Smith and Packaging Corp 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 Packaging Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of DS Smith and Packaging Corp.
Diversification Opportunities for DS Smith and Packaging Corp
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between DITHF and Packaging is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding DS Smith PLC and Packaging Corp of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Packaging Corp 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 Packaging Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Packaging Corp has no effect on the direction of DS Smith i.e., DS Smith and Packaging Corp go up and down completely randomly.
Pair Corralation between DS Smith and Packaging Corp
Assuming the 90 days horizon DS Smith PLC is expected to generate 2.79 times more return on investment than Packaging Corp. However, DS Smith is 2.79 times more volatile than Packaging Corp of. It trades about 0.08 of its potential returns per unit of risk. Packaging Corp of is currently generating about 0.15 per unit of risk. If you would invest 385.00 in DS Smith PLC on August 31, 2024 and sell it today you would earn a total of 358.00 from holding DS Smith PLC or generate 92.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 83.96% |
| Values | Daily Returns |
DS Smith PLC vs. Packaging Corp of
Performance |
| Timeline |
| DS Smith PLC |
| Packaging Corp |
DS Smith and Packaging Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DS Smith and Packaging Corp
The main advantage of trading using opposite DS Smith and Packaging Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DS Smith position performs unexpectedly, Packaging Corp 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 Packaging Corp will offset losses from the drop in Packaging Corp's long position.| DS Smith vs. Packaging Corp of | DS Smith vs. International Paper | DS Smith vs. Ball Corporation | DS Smith vs. Amcor plc |
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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