Correlation Between Packaging Corp and DS Smith
Can any of the company-specific risk be diversified away by investing in both Packaging Corp 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 Packaging Corp and DS Smith into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Packaging Corp of and DS Smith PLC, you can compare the effects of market volatilities on Packaging Corp 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 Packaging Corp with a short position of DS Smith. Check out your portfolio center. Please also check ongoing floating volatility patterns of Packaging Corp and DS Smith.
Diversification Opportunities for Packaging Corp and DS Smith
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Packaging and DITHF is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Packaging Corp of 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 Packaging Corp 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 Packaging Corp of 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 Packaging Corp i.e., Packaging Corp and DS Smith go up and down completely randomly.
Pair Corralation between Packaging Corp and DS Smith
Considering the 90-day investment horizon Packaging Corp is expected to generate 1.55 times less return on investment than DS Smith. But when comparing it to its historical volatility, Packaging Corp of is 2.26 times less risky than DS Smith. It trades about 0.22 of its potential returns per unit of risk. DS Smith PLC is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 465.00 in DS Smith PLC on August 31, 2024 and sell it today you would earn a total of 278.00 from holding DS Smith PLC or generate 59.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Packaging Corp of vs. DS Smith PLC
Performance |
| Timeline |
| Packaging Corp |
| DS Smith PLC |
Packaging Corp and DS Smith Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Packaging Corp and DS Smith
The main advantage of trading using opposite Packaging Corp and DS Smith positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Packaging Corp 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.The idea behind Packaging Corp of and DS Smith PLC 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.| 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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