Correlation Between DFS Furniture and Hardide PLC

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

Diversification Opportunities for DFS Furniture and Hardide PLC

0.03

Correlation Coefficient

DFS Furniture  Hardide PLC

Significant diversification

The 3 months correlation between DFS and Hardide is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding DFS Furniture PLC and Hardide PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hardide PLC 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 Hardide PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hardide PLC has no effect on the direction of DFS Furniture i.e., DFS Furniture and Hardide PLC go up and down completely randomly.

Pair Corralation between DFS Furniture and Hardide PLC

Assuming the 90 days trading horizon DFS Furniture PLC is expected to under-perform the Hardide PLC. But the stock apears to be less risky and, when comparing its historical volatility, DFS Furniture PLC is 5.35 times less risky than Hardide PLC. The stock trades about -0.06 of its potential returns per unit of risk. The Hardide PLC is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  500.00  in Hardide PLC on October 6, 2024 and sell it today you would earn a total of  63.00  from holding Hardide PLC or generate 12.6% return on investment over 90 days.

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

DFS Furniture PLC  vs.  Hardide PLC

DFS Furniture PLC

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DFS Furniture PLC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, DFS Furniture may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Hardide PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hardide PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Hardide PLC is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with DFS Furniture and Hardide PLC

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

The idea behind DFS Furniture PLC and Hardide PLC 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.