Correlation Between DS Smith and AES Corp
Can any of the company-specific risk be diversified away by investing in both DS Smith and AES Corp 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 AES Corp 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 AES Corp, you can compare the effects of market volatilities on DS Smith and AES Corp 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 AES Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of DS Smith and AES Corp.
Diversification Opportunities for DS Smith and AES Corp
Pay attention - limited upside
The 3 months correlation between SMDS and AES is -0.92. Overlapping area represents the amount of risk that can be diversified away by holding DS Smith PLC and AES Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AES Corp 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 AES Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AES Corp has no effect on the direction of DS Smith i.e., DS Smith and AES Corp go up and down completely randomly.
Pair Corralation between DS Smith and AES Corp
Assuming the 90 days trading horizon DS Smith PLC is expected to generate 0.93 times more return on investment than AES Corp. However, DS Smith PLC is 1.07 times less risky than AES Corp. It trades about 0.15 of its potential returns per unit of risk. AES Corp is currently generating about -0.11 per unit of risk. If you would invest 35,474 in DS Smith PLC on September 24, 2024 and sell it today you would earn a total of 18,326 from holding DS Smith PLC or generate 51.66% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Significant |
Accuracy | 99.22% |
Values | Daily Returns |
DS Smith PLC vs. AES Corp
Performance |
Timeline |
DS Smith PLC |
AES Corp |
DS Smith and AES Corp Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with DS Smith and AES Corp
The main advantage of trading using opposite DS Smith and AES Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DS Smith position performs unexpectedly, AES Corp 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 AES Corp will offset losses from the drop in AES Corp's long position.DS Smith vs. Givaudan SA | DS Smith vs. Antofagasta PLC | DS Smith vs. Ferrexpo PLC | DS Smith vs. Atalaya Mining |
AES Corp vs. Uniper SE | AES Corp vs. Mulberry Group PLC | AES Corp vs. London Security Plc | AES Corp vs. Triad Group PLC |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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