Correlation Between DS Smith and Freeport McMoRan
Can any of the company-specific risk be diversified away by investing in both DS Smith and Freeport McMoRan 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 Freeport McMoRan 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 Freeport McMoRan, you can compare the effects of market volatilities on DS Smith and Freeport McMoRan 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 Freeport McMoRan. Check out your portfolio center. Please also check ongoing floating volatility patterns of DS Smith and Freeport McMoRan.
Diversification Opportunities for DS Smith and Freeport McMoRan
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between SMDS and Freeport is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding DS Smith PLC and Freeport McMoRan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freeport McMoRan 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 Freeport McMoRan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freeport McMoRan has no effect on the direction of DS Smith i.e., DS Smith and Freeport McMoRan go up and down completely randomly.
Pair Corralation between DS Smith and Freeport McMoRan
Assuming the 90 days trading horizon DS Smith PLC is expected to generate 0.5 times more return on investment than Freeport McMoRan. However, DS Smith PLC is 2.0 times less risky than Freeport McMoRan. It trades about 0.14 of its potential returns per unit of risk. Freeport McMoRan is currently generating about -0.24 per unit of risk. If you would invest 54,071 in DS Smith PLC on October 11, 2024 and sell it today you would earn a total of 1,329 from holding DS Smith PLC or generate 2.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
DS Smith PLC vs. Freeport McMoRan
Performance |
| Timeline |
| DS Smith PLC |
| Freeport McMoRan |
DS Smith and Freeport McMoRan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DS Smith and Freeport McMoRan
The main advantage of trading using opposite DS Smith and Freeport McMoRan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DS Smith position performs unexpectedly, Freeport McMoRan 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 Freeport McMoRan will offset losses from the drop in Freeport McMoRan's long position.| DS Smith vs. Coeur Mining | DS Smith vs. Spotify Technology SA | DS Smith vs. Europa Metals | DS Smith vs. Axway Software SA |
| Freeport McMoRan vs. Empire Metals Limited | Freeport McMoRan vs. Lundin Mining Corp | Freeport McMoRan vs. Vitec Software Group | Freeport McMoRan vs. European Metals Holdings |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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