Correlation Between DS Smith and EVS Broadcast
Can any of the company-specific risk be diversified away by investing in both DS Smith and EVS Broadcast 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 EVS Broadcast 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 EVS Broadcast Equipment, you can compare the effects of market volatilities on DS Smith and EVS Broadcast 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 EVS Broadcast. Check out your portfolio center. Please also check ongoing floating volatility patterns of DS Smith and EVS Broadcast.
Diversification Opportunities for DS Smith and EVS Broadcast
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between SMDS and EVS is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding DS Smith PLC and EVS Broadcast Equipment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EVS Broadcast Equipment 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 EVS Broadcast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EVS Broadcast Equipment has no effect on the direction of DS Smith i.e., DS Smith and EVS Broadcast go up and down completely randomly.
Pair Corralation between DS Smith and EVS Broadcast
Assuming the 90 days trading horizon DS Smith PLC is expected to generate 1.22 times more return on investment than EVS Broadcast. However, DS Smith is 1.22 times more volatile than EVS Broadcast Equipment. It trades about 0.08 of its potential returns per unit of risk. EVS Broadcast Equipment is currently generating about 0.06 per unit of risk. If you would invest 29,487 in DS Smith PLC on August 30, 2024 and sell it today you would earn a total of 28,713 from holding DS Smith PLC or generate 97.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 97.99% |
| Values | Daily Returns |
DS Smith PLC vs. EVS Broadcast Equipment
Performance |
| Timeline |
| DS Smith PLC |
| EVS Broadcast Equipment |
DS Smith and EVS Broadcast Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DS Smith and EVS Broadcast
The main advantage of trading using opposite DS Smith and EVS Broadcast positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DS Smith position performs unexpectedly, EVS Broadcast 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 EVS Broadcast will offset losses from the drop in EVS Broadcast's long position.| DS Smith vs. Norwegian Air Shuttle | DS Smith vs. Impax Environmental Markets | DS Smith vs. Aeorema Communications Plc | DS Smith vs. Cellnex Telecom SA |
| EVS Broadcast vs. Lendinvest PLC | EVS Broadcast vs. Neometals | EVS Broadcast vs. Albion Technology General | EVS Broadcast vs. Jupiter Fund Management |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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