Correlation Between Smurfit WestRock and Douglas Dynamics
Can any of the company-specific risk be diversified away by investing in both Smurfit WestRock and Douglas Dynamics 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 Smurfit WestRock and Douglas Dynamics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smurfit WestRock plc and Douglas Dynamics, you can compare the effects of market volatilities on Smurfit WestRock and Douglas Dynamics 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 Smurfit WestRock with a short position of Douglas Dynamics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smurfit WestRock and Douglas Dynamics.
Diversification Opportunities for Smurfit WestRock and Douglas Dynamics
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Smurfit and Douglas is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Smurfit WestRock plc and Douglas Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Douglas Dynamics and Smurfit WestRock 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 Smurfit WestRock plc are associated (or correlated) with Douglas Dynamics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Douglas Dynamics has no effect on the direction of Smurfit WestRock i.e., Smurfit WestRock and Douglas Dynamics go up and down completely randomly.
Pair Corralation between Smurfit WestRock and Douglas Dynamics
Allowing for the 90-day total investment horizon Smurfit WestRock plc is expected to generate 1.33 times more return on investment than Douglas Dynamics. However, Smurfit WestRock is 1.33 times more volatile than Douglas Dynamics. It trades about 0.1 of its potential returns per unit of risk. Douglas Dynamics is currently generating about 0.01 per unit of risk. If you would invest 3,428 in Smurfit WestRock plc on August 24, 2024 and sell it today you would earn a total of 2,209 from holding Smurfit WestRock plc or generate 64.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 72.69% |
| Values | Daily Returns |
Smurfit WestRock plc vs. Douglas Dynamics
Performance |
| Timeline |
| Smurfit WestRock plc |
| Douglas Dynamics |
Smurfit WestRock and Douglas Dynamics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smurfit WestRock and Douglas Dynamics
The main advantage of trading using opposite Smurfit WestRock and Douglas Dynamics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smurfit WestRock position performs unexpectedly, Douglas Dynamics 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 Douglas Dynamics will offset losses from the drop in Douglas Dynamics' long position.| Smurfit WestRock vs. ON Semiconductor | Smurfit WestRock vs. Everspin Technologies | Smurfit WestRock vs. Kulicke and Soffa | Smurfit WestRock vs. Advanced Micro Devices |
| Douglas Dynamics vs. Monro Muffler Brake | Douglas Dynamics vs. Motorcar Parts of | Douglas Dynamics vs. Standard Motor Products | Douglas Dynamics vs. Stoneridge |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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