Correlation Between American Tower and DFS Furniture

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

By analyzing existing cross correlation between American Tower REIT and DFS Furniture PLC, you can compare the effects of market volatilities on American Tower and DFS Furniture 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 American Tower with a short position of DFS Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Tower and DFS Furniture.

Diversification Opportunities for American Tower and DFS Furniture

-0.48

Correlation Coefficient

American Tower  DFS Furniture

Very good diversification

The 3 months correlation between American and DFS is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding American Tower REIT and DFS Furniture PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DFS Furniture PLC and American Tower 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 American Tower REIT are associated (or correlated) with DFS Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DFS Furniture PLC has no effect on the direction of American Tower i.e., American Tower and DFS Furniture go up and down completely randomly.

Pair Corralation between American Tower and DFS Furniture

Assuming the 90 days trading horizon American Tower REIT is expected to under-perform the DFS Furniture. But the stock apears to be less risky and, when comparing its historical volatility, American Tower REIT is 1.24 times less risky than DFS Furniture. The stock trades about 0.0 of its potential returns per unit of risk. The DFS Furniture PLC is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  14,578  in DFS Furniture PLC on October 5, 2024 and sell it today you would lose (498.00) from holding DFS Furniture PLC or give up 3.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.58%
Values	Daily Returns

American Tower REIT  vs.  DFS Furniture PLC

American Tower REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Tower REIT 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.

DFS Furniture PLC

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DFS Furniture PLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, DFS Furniture may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with American Tower and DFS Furniture

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

The idea behind American Tower REIT and DFS Furniture 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.

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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.