Correlation Between DS Smith and Fulcrum Metals

Can any of the company-specific risk be diversified away by investing in both DS Smith and Fulcrum Metals 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 Fulcrum Metals 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 Fulcrum Metals PLC, you can compare the effects of market volatilities on DS Smith and Fulcrum Metals 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 Fulcrum Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of DS Smith and Fulcrum Metals.

Diversification Opportunities for DS Smith and Fulcrum Metals

-0.87

Correlation Coefficient

DS Smith  Fulcrum Metals

Pay attention - limited upside

The 3 months correlation between SMDS and Fulcrum is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding DS Smith PLC and Fulcrum Metals PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fulcrum Metals 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 Fulcrum Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fulcrum Metals PLC has no effect on the direction of DS Smith i.e., DS Smith and Fulcrum Metals go up and down completely randomly.

Pair Corralation between DS Smith and Fulcrum Metals

Assuming the 90 days trading horizon DS Smith PLC is expected to generate 0.98 times more return on investment than Fulcrum Metals. However, DS Smith PLC is 1.02 times less risky than Fulcrum Metals. It trades about 0.07 of its potential returns per unit of risk. Fulcrum Metals PLC is currently generating about -0.08 per unit of risk. If you would invest  31,596  in DS Smith PLC on October 4, 2024 and sell it today you would earn a total of  22,604  from holding DS Smith PLC or generate 71.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.58%
Values	Daily Returns

DS Smith PLC  vs.  Fulcrum Metals PLC

DS Smith PLC

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DS Smith PLC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, DS Smith unveiled solid returns over the last few months and may actually be approaching a breakup point.

Fulcrum Metals PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fulcrum Metals PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with DS Smith and Fulcrum Metals

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

The idea behind DS Smith PLC and Fulcrum Metals 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .