Correlation Between DFS Furniture and H M

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

Diversification Opportunities for DFS Furniture and H M

0.32

Correlation Coefficient

DFS Furniture  H M

Weak diversification

The 3 months correlation between DFS and HMSB is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding DFS Furniture PLC and H M Hennes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on H M Hennes 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 H M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of H M Hennes has no effect on the direction of DFS Furniture i.e., DFS Furniture and H M go up and down completely randomly.

Pair Corralation between DFS Furniture and H M

Assuming the 90 days trading horizon DFS Furniture is expected to generate 4.51 times less return on investment than H M. But when comparing it to its historical volatility, DFS Furniture PLC is 1.29 times less risky than H M. It trades about 0.02 of its potential returns per unit of risk. H M Hennes is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  395.00  in H M Hennes on December 2, 2024 and sell it today you would earn a total of  883.00  from holding H M Hennes or generate 223.54% return on investment over 90 days.

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

DFS Furniture PLC  vs.  H M Hennes

DFS Furniture PLC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DFS Furniture PLC are ranked lower than 2 (%) 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.

H M Hennes

Risk-Adjusted Performance

Very Weak

Over the last 90 days H M Hennes has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, H M 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 H M

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

The idea behind DFS Furniture PLC and H M Hennes 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.