Correlation Between DFS Furniture and Universal Music

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

Diversification Opportunities for DFS Furniture and Universal Music

0.55

Correlation Coefficient

DFS Furniture  Universal Music

Very weak diversification

The 3 months correlation between DFS and Universal is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding DFS Furniture PLC and Universal Music Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Music Group 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 Universal Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Music Group has no effect on the direction of DFS Furniture i.e., DFS Furniture and Universal Music go up and down completely randomly.

Pair Corralation between DFS Furniture and Universal Music

Assuming the 90 days trading horizon DFS Furniture PLC is expected to under-perform the Universal Music. In addition to that, DFS Furniture is 2.6 times more volatile than Universal Music Group. It trades about -0.15 of its total potential returns per unit of risk. Universal Music Group is currently generating about -0.13 per unit of volatility. If you would invest  2,475  in Universal Music Group on October 26, 2024 and sell it today you would lose (53.00) from holding Universal Music Group or give up 2.14% of portfolio value over 90 days.

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

DFS Furniture PLC  vs.  Universal Music Group

DFS Furniture PLC

Risk-Adjusted Performance

2 of 100

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

Universal Music Group

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Music Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Universal Music is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with DFS Furniture and Universal Music

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

The idea behind DFS Furniture PLC and Universal Music Group 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.

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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.