Correlation Between Smurfit Kappa and Dalata Hotel

Can any of the company-specific risk be diversified away by investing in both Smurfit Kappa and Dalata Hotel 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 Dalata Hotel 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 Dalata Hotel Group, you can compare the effects of market volatilities on Smurfit Kappa and Dalata Hotel 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 Dalata Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smurfit Kappa and Dalata Hotel.

Diversification Opportunities for Smurfit Kappa and Dalata Hotel

-0.03

Correlation Coefficient

Smurfit Kappa  Dalata Hotel

Good diversification

The 3 months correlation between Smurfit and Dalata is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Smurfit Kappa Group and Dalata Hotel Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dalata Hotel Group 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 Dalata Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dalata Hotel Group has no effect on the direction of Smurfit Kappa i.e., Smurfit Kappa and Dalata Hotel go up and down completely randomly.

Pair Corralation between Smurfit Kappa and Dalata Hotel

Assuming the 90 days trading horizon Smurfit Kappa Group is expected to generate 0.8 times more return on investment than Dalata Hotel. However, Smurfit Kappa Group is 1.26 times less risky than Dalata Hotel. It trades about 0.18 of its potential returns per unit of risk. Dalata Hotel Group is currently generating about -0.04 per unit of risk. If you would invest  3,899  in Smurfit Kappa Group on March 5, 2024 and sell it today you would earn a total of  571.00  from holding Smurfit Kappa Group or generate 14.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Smurfit Kappa Group  vs.  Dalata Hotel Group

Smurfit Kappa Group

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Smurfit Kappa Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively weak basic indicators, Smurfit Kappa reported solid returns over the last few months and may actually be approaching a breakup point.

Dalata Hotel Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dalata Hotel Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Dalata Hotel is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Smurfit Kappa and Dalata Hotel

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

The idea behind Smurfit Kappa Group and Dalata Hotel Group 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 Transaction History module to view history of all your transactions and understand their impact on performance.