Correlation Between DFS Furniture and Malvern International

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

Diversification Opportunities for DFS Furniture and Malvern International

0.64

Correlation Coefficient

DFS Furniture  Malvern International

Poor diversification

The 3 months correlation between DFS and Malvern is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding DFS Furniture PLC and Malvern International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Malvern International 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 Malvern International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Malvern International has no effect on the direction of DFS Furniture i.e., DFS Furniture and Malvern International go up and down completely randomly.

Pair Corralation between DFS Furniture and Malvern International

Assuming the 90 days trading horizon DFS Furniture PLC is expected to generate 0.99 times more return on investment than Malvern International. However, DFS Furniture PLC is 1.01 times less risky than Malvern International. It trades about 0.07 of its potential returns per unit of risk. Malvern International is currently generating about -0.02 per unit of risk. If you would invest  10,991  in DFS Furniture PLC on October 8, 2024 and sell it today you would earn a total of  3,009  from holding DFS Furniture PLC or generate 27.38% return on investment over 90 days.

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

DFS Furniture PLC  vs.  Malvern International

DFS Furniture PLC

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DFS Furniture PLC are ranked lower than 3 (%) 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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Malvern International

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Malvern International are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Malvern International unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DFS Furniture and Malvern International

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

The idea behind DFS Furniture PLC and Malvern International 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.