Correlation Between DFS Furniture and Applied Materials
Can any of the company-specific risk be diversified away by investing in both DFS Furniture and Applied Materials 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 Applied Materials 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 Applied Materials, you can compare the effects of market volatilities on DFS Furniture and Applied Materials 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 Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of DFS Furniture and Applied Materials.
Diversification Opportunities for DFS Furniture and Applied Materials
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between DFS and Applied is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding DFS Furniture PLC and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials 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 Applied Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials has no effect on the direction of DFS Furniture i.e., DFS Furniture and Applied Materials go up and down completely randomly.
Pair Corralation between DFS Furniture and Applied Materials
Assuming the 90 days trading horizon DFS Furniture PLC is expected to generate 0.74 times more return on investment than Applied Materials. However, DFS Furniture PLC is 1.34 times less risky than Applied Materials. It trades about 0.17 of its potential returns per unit of risk. Applied Materials is currently generating about -0.1 per unit of risk. If you would invest 11,500 in DFS Furniture PLC on September 24, 2024 and sell it today you would earn a total of 2,640 from holding DFS Furniture PLC or generate 22.96% 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. Applied Materials
Performance |
Timeline |
DFS Furniture PLC |
Applied Materials |
DFS Furniture and Applied Materials Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with DFS Furniture and Applied Materials
The main advantage of trading using opposite DFS Furniture and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DFS Furniture position performs unexpectedly, Applied Materials 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 Applied Materials will offset losses from the drop in Applied Materials' long position.DFS Furniture vs. Broadridge Financial Solutions | DFS Furniture vs. JB Hunt Transport | DFS Furniture vs. Bankers Investment Trust | DFS Furniture vs. Roadside Real Estate |
Applied Materials vs. Sligro Food Group | Applied Materials vs. DFS Furniture PLC | Applied Materials vs. International Consolidated Airlines | Applied Materials vs. Auto Trader Group |
Check out your portfolio center.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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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