Correlation Between DFS Furniture and BORR DRILLING

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

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

Diversification Opportunities for DFS Furniture and BORR DRILLING

-0.66

Correlation Coefficient

DFS Furniture  BORR DRILLING

Excellent diversification

The 3 months correlation between DFS and BORR is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding DFS Furniture PLC and BORR DRILLING NEW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BORR DRILLING NEW and DFS Furniture 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 DFS Furniture PLC are associated (or correlated) with BORR DRILLING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BORR DRILLING NEW has no effect on the direction of DFS Furniture i.e., DFS Furniture and BORR DRILLING go up and down completely randomly.

Pair Corralation between DFS Furniture and BORR DRILLING

Assuming the 90 days trading horizon DFS Furniture PLC is expected to generate 0.5 times more return on investment than BORR DRILLING. However, DFS Furniture PLC is 2.0 times less risky than BORR DRILLING. It trades about 0.19 of its potential returns per unit of risk. BORR DRILLING NEW is currently generating about -0.13 per unit of risk. If you would invest  131.00  in DFS Furniture PLC on September 23, 2024 and sell it today you would earn a total of  33.00  from holding DFS Furniture PLC or generate 25.19% return on investment over 90 days.

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

DFS Furniture PLC  vs.  BORR DRILLING NEW

DFS Furniture PLC

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DFS Furniture PLC are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, DFS Furniture unveiled solid returns over the last few months and may actually be approaching a breakup point.

BORR DRILLING NEW

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BORR DRILLING NEW has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with DFS Furniture and BORR DRILLING

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

The idea behind DFS Furniture PLC and BORR DRILLING NEW 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.