Correlation Between Blue Star and DS Smith

Can any of the company-specific risk be diversified away by investing in both Blue Star and DS Smith 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 Blue Star and DS Smith into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Blue Star Capital and DS Smith PLC, you can compare the effects of market volatilities on Blue Star and DS Smith 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 Blue Star with a short position of DS Smith. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blue Star and DS Smith.

Diversification Opportunities for Blue Star and DS Smith

-0.02

Correlation Coefficient

Blue Star  DS Smith

Good diversification

The 3 months correlation between Blue and SMDS is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Blue Star Capital and DS Smith PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DS Smith PLC and Blue Star 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 Blue Star Capital are associated (or correlated) with DS Smith. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DS Smith PLC has no effect on the direction of Blue Star i.e., Blue Star and DS Smith go up and down completely randomly.

Pair Corralation between Blue Star and DS Smith

Assuming the 90 days trading horizon Blue Star Capital is expected to generate 111.73 times more return on investment than DS Smith. However, Blue Star is 111.73 times more volatile than DS Smith PLC. It trades about 0.14 of its potential returns per unit of risk. DS Smith PLC is currently generating about 0.05 per unit of risk. If you would invest  400.00  in Blue Star Capital on December 4, 2024 and sell it today you would earn a total of  450.00  from holding Blue Star Capital or generate 112.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	68.85%
Values	Daily Returns

Blue Star Capital  vs.  DS Smith PLC

Blue Star Capital

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Star Capital are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Blue Star exhibited solid returns over the last few months and may actually be approaching a breakup point.

DS Smith PLC

Risk-Adjusted Performance

Insignificant

Over the last 90 days DS Smith PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, DS Smith is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Blue Star and DS Smith

The main advantage of trading using opposite Blue Star and DS Smith positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blue Star position performs unexpectedly, DS Smith 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 DS Smith will offset losses from the drop in DS Smith's long position.

The idea behind Blue Star Capital and DS Smith PLC pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.