Correlation Between DFS Furniture and CITIC Telecom

Can any of the company-specific risk be diversified away by investing in both DFS Furniture and CITIC Telecom 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 CITIC Telecom 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 CITIC Telecom International, you can compare the effects of market volatilities on DFS Furniture and CITIC Telecom 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 CITIC Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of DFS Furniture and CITIC Telecom.

Diversification Opportunities for DFS Furniture and CITIC Telecom

0.28

Correlation Coefficient

DFS Furniture  CITIC Telecom

Modest diversification

The 3 months correlation between DFS and CITIC is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding DFS Furniture PLC and CITIC Telecom International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC Telecom Intern 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 CITIC Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIC Telecom Intern has no effect on the direction of DFS Furniture i.e., DFS Furniture and CITIC Telecom go up and down completely randomly.

Pair Corralation between DFS Furniture and CITIC Telecom

Assuming the 90 days trading horizon DFS Furniture PLC is expected to generate 1.74 times more return on investment than CITIC Telecom. However, DFS Furniture is 1.74 times more volatile than CITIC Telecom International. It trades about -0.04 of its potential returns per unit of risk. CITIC Telecom International is currently generating about -0.09 per unit of risk. If you would invest  166.00  in DFS Furniture PLC on October 26, 2024 and sell it today you would lose (6.00) from holding DFS Furniture PLC or give up 3.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

DFS Furniture PLC  vs.  CITIC Telecom International

DFS Furniture PLC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DFS Furniture PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, DFS Furniture is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

CITIC Telecom Intern

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CITIC Telecom International are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, CITIC Telecom is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with DFS Furniture and CITIC Telecom

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

The idea behind DFS Furniture PLC and CITIC Telecom International 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.