Correlation Between DS Smith and JB Hunt
Can any of the company-specific risk be diversified away by investing in both DS Smith and JB Hunt 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 JB Hunt 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 JB Hunt Transport, you can compare the effects of market volatilities on DS Smith and JB Hunt 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 JB Hunt. Check out your portfolio center. Please also check ongoing floating volatility patterns of DS Smith and JB Hunt.
Diversification Opportunities for DS Smith and JB Hunt
Poor diversification
The 3 months correlation between SMDS and 0J71 is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding DS Smith PLC and JB Hunt Transport in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JB Hunt Transport 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 JB Hunt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JB Hunt Transport has no effect on the direction of DS Smith i.e., DS Smith and JB Hunt go up and down completely randomly.
Pair Corralation between DS Smith and JB Hunt
Assuming the 90 days trading horizon DS Smith PLC is expected to generate 0.81 times more return on investment than JB Hunt. However, DS Smith PLC is 1.24 times less risky than JB Hunt. It trades about -0.28 of its potential returns per unit of risk. JB Hunt Transport is currently generating about -0.36 per unit of risk. If you would invest 57,580 in DS Smith PLC on October 3, 2024 and sell it today you would lose (3,380) from holding DS Smith PLC or give up 5.87% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 95.45% |
Values | Daily Returns |
DS Smith PLC vs. JB Hunt Transport
Performance |
Timeline |
DS Smith PLC |
JB Hunt Transport |
DS Smith and JB Hunt Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with DS Smith and JB Hunt
The main advantage of trading using opposite DS Smith and JB Hunt positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DS Smith position performs unexpectedly, JB Hunt 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 JB Hunt will offset losses from the drop in JB Hunt's long position.DS Smith vs. National Beverage Corp | DS Smith vs. Silvercorp Metals | DS Smith vs. Lundin Mining Corp | DS Smith vs. Premier Foods PLC |
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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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