Correlation Between DS Smith and Northern Bear
Can any of the company-specific risk be diversified away by investing in both DS Smith and Northern Bear 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 Northern Bear 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 Northern Bear Plc, you can compare the effects of market volatilities on DS Smith and Northern Bear 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 Northern Bear. Check out your portfolio center. Please also check ongoing floating volatility patterns of DS Smith and Northern Bear.
Diversification Opportunities for DS Smith and Northern Bear
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between SMDS and Northern is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding DS Smith PLC and Northern Bear Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Bear 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 Northern Bear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Bear Plc has no effect on the direction of DS Smith i.e., DS Smith and Northern Bear go up and down completely randomly.
Pair Corralation between DS Smith and Northern Bear
Assuming the 90 days trading horizon DS Smith PLC is expected to generate 0.65 times more return on investment than Northern Bear. However, DS Smith PLC is 1.54 times less risky than Northern Bear. It trades about 0.08 of its potential returns per unit of risk. Northern Bear Plc is currently generating about 0.03 per unit of risk. If you would invest 29,159 in DS Smith PLC on September 19, 2024 and sell it today you would earn a total of 25,191 from holding DS Smith PLC or generate 86.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.4% |
| Values | Daily Returns |
DS Smith PLC vs. Northern Bear Plc
Performance |
| Timeline |
| DS Smith PLC |
| Northern Bear Plc |
DS Smith and Northern Bear Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DS Smith and Northern Bear
The main advantage of trading using opposite DS Smith and Northern Bear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DS Smith position performs unexpectedly, Northern Bear 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 Northern Bear will offset losses from the drop in Northern Bear's long position.| DS Smith vs. JB Hunt Transport | DS Smith vs. United Airlines Holdings | DS Smith vs. Ashtead Technology Holdings | DS Smith vs. Vitec Software Group |
| Northern Bear vs. Summit Materials Cl | Northern Bear vs. Molson Coors Beverage | Northern Bear vs. Axway Software SA | Northern Bear vs. Ecclesiastical Insurance Office |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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