Correlation Between DS Smith and Marstons PLC
Can any of the company-specific risk be diversified away by investing in both DS Smith and Marstons PLC 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 Marstons PLC 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 Marstons PLC, you can compare the effects of market volatilities on DS Smith and Marstons PLC 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 Marstons PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of DS Smith and Marstons PLC.
Diversification Opportunities for DS Smith and Marstons PLC
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between SMDS and Marstons is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding DS Smith PLC and Marstons PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marstons PLC 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 Marstons PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marstons PLC has no effect on the direction of DS Smith i.e., DS Smith and Marstons PLC go up and down completely randomly.
Pair Corralation between DS Smith and Marstons PLC
Assuming the 90 days trading horizon DS Smith PLC is expected to under-perform the Marstons PLC. But the stock apears to be less risky and, when comparing its historical volatility, DS Smith PLC is 2.05 times less risky than Marstons PLC. The stock trades about -0.38 of its potential returns per unit of risk. The Marstons PLC is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 3,890 in Marstons PLC on September 24, 2024 and sell it today you would earn a total of 660.00 from holding Marstons PLC or generate 16.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
DS Smith PLC vs. Marstons PLC
Performance |
| Timeline |
| DS Smith PLC |
| Marstons PLC |
DS Smith and Marstons PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DS Smith and Marstons PLC
The main advantage of trading using opposite DS Smith and Marstons PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DS Smith position performs unexpectedly, Marstons PLC 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 Marstons PLC will offset losses from the drop in Marstons PLC's long position.| DS Smith vs. Givaudan SA | DS Smith vs. Antofagasta PLC | DS Smith vs. Ferrexpo PLC | DS Smith vs. Atalaya Mining |
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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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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