Correlation Between Smurfit Kappa and SPORTING

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

By analyzing existing cross correlation between Smurfit Kappa Group and SPORTING, you can compare the effects of market volatilities on Smurfit Kappa and SPORTING 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 Kappa with a short position of SPORTING. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smurfit Kappa and SPORTING.

Diversification Opportunities for Smurfit Kappa and SPORTING

-0.09

Correlation Coefficient

Smurfit Kappa  SPORTING

Good diversification

The 3 months correlation between Smurfit and SPORTING is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Smurfit Kappa Group and SPORTING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPORTING and Smurfit Kappa 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 Kappa Group are associated (or correlated) with SPORTING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPORTING has no effect on the direction of Smurfit Kappa i.e., Smurfit Kappa and SPORTING go up and down completely randomly.

Pair Corralation between Smurfit Kappa and SPORTING

Assuming the 90 days horizon Smurfit Kappa Group is expected to under-perform the SPORTING. In addition to that, Smurfit Kappa is 1.73 times more volatile than SPORTING. It trades about -0.22 of its total potential returns per unit of risk. SPORTING is currently generating about -0.18 per unit of volatility. If you would invest  106.00  in SPORTING on September 23, 2024 and sell it today you would lose (4.00) from holding SPORTING or give up 3.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Smurfit Kappa Group  vs.  SPORTING

Smurfit Kappa Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Smurfit Kappa Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Smurfit Kappa reported solid returns over the last few months and may actually be approaching a breakup point.

SPORTING

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPORTING are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, SPORTING 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 Smurfit Kappa and SPORTING

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

The idea behind Smurfit Kappa Group and SPORTING 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.