Correlation Between DFS Furniture and United Internet

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

Diversification Opportunities for DFS Furniture and United Internet

-0.34
  Correlation Coefficient

Very good diversification

The 3 months correlation between DFS and United is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding DFS Furniture PLC and United Internet AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Internet AG 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 United Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Internet AG has no effect on the direction of DFS Furniture i.e., DFS Furniture and United Internet go up and down completely randomly.

Pair Corralation between DFS Furniture and United Internet

Assuming the 90 days trading horizon DFS Furniture PLC is expected to under-perform the United Internet. But the stock apears to be less risky and, when comparing its historical volatility, DFS Furniture PLC is 1.03 times less risky than United Internet. The stock trades about -0.38 of its potential returns per unit of risk. The United Internet AG is currently generating about -0.25 of returns per unit of risk over similar time horizon. If you would invest  1,571  in United Internet AG on October 15, 2024 and sell it today you would lose (88.00) from holding United Internet AG or give up 5.6% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

DFS Furniture PLC  vs.  United Internet AG

 Performance 
       Timeline  
DFS Furniture PLC 

Risk-Adjusted Performance

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Strong
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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 rather sound technical and fundamental indicators, DFS Furniture is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.
United Internet AG 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days United Internet AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady 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 and United Internet Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with DFS Furniture and United Internet

The main advantage of trading using opposite DFS Furniture and United Internet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DFS Furniture position performs unexpectedly, United Internet 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 United Internet will offset losses from the drop in United Internet's long position.
The idea behind DFS Furniture PLC and United Internet AG 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 Stocks Directory module to find actively traded stocks across global markets.

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