Correlation Between DFS Furniture and Eastman Chemical

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

Diversification Opportunities for DFS Furniture and Eastman Chemical

-0.09

Correlation Coefficient

DFS Furniture  Eastman Chemical

Good diversification

The 3 months correlation between DFS and Eastman is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding DFS Furniture PLC and Eastman Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical 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 Eastman Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastman Chemical has no effect on the direction of DFS Furniture i.e., DFS Furniture and Eastman Chemical go up and down completely randomly.

Pair Corralation between DFS Furniture and Eastman Chemical

Assuming the 90 days trading horizon DFS Furniture PLC is expected to generate 1.76 times more return on investment than Eastman Chemical. However, DFS Furniture is 1.76 times more volatile than Eastman Chemical. It trades about 0.04 of its potential returns per unit of risk. Eastman Chemical is currently generating about 0.04 per unit of risk. If you would invest  125.00  in DFS Furniture PLC on October 14, 2024 and sell it today you would earn a total of  28.00  from holding DFS Furniture PLC or generate 22.4% return on investment over 90 days.

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

DFS Furniture PLC  vs.  Eastman Chemical

DFS Furniture PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DFS Furniture PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, DFS Furniture is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Eastman Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eastman Chemical 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 February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with DFS Furniture and Eastman Chemical

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

The idea behind DFS Furniture PLC and Eastman Chemical 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.