Correlation Between DFS Furniture and GoldMining

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

Diversification Opportunities for DFS Furniture and GoldMining

0.23

Correlation Coefficient

DFS Furniture  GoldMining

Modest diversification

The 3 months correlation between DFS and GoldMining is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding DFS Furniture PLC and GoldMining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GoldMining 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 GoldMining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GoldMining has no effect on the direction of DFS Furniture i.e., DFS Furniture and GoldMining go up and down completely randomly.

Pair Corralation between DFS Furniture and GoldMining

Assuming the 90 days trading horizon DFS Furniture PLC is expected to under-perform the GoldMining. In addition to that, DFS Furniture is 1.02 times more volatile than GoldMining. It trades about -0.09 of its total potential returns per unit of risk. GoldMining is currently generating about 0.15 per unit of volatility. If you would invest  113.00  in GoldMining on December 5, 2024 and sell it today you would earn a total of  5.00  from holding GoldMining or generate 4.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	54.55%
Values	Daily Returns

DFS Furniture PLC  vs.  GoldMining

DFS Furniture PLC

Risk-Adjusted Performance

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 latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

GoldMining

Risk-Adjusted Performance

Very Weak

Over the last 90 days GoldMining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with DFS Furniture and GoldMining

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

The idea behind DFS Furniture PLC and GoldMining 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.