Correlation Between DFS Furniture and Versarien PLC

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

Diversification Opportunities for DFS Furniture and Versarien PLC

-0.01

Correlation Coefficient

DFS Furniture  Versarien PLC

Good diversification

The 3 months correlation between DFS and Versarien is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding DFS Furniture PLC and Versarien PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Versarien 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 Versarien PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Versarien PLC has no effect on the direction of DFS Furniture i.e., DFS Furniture and Versarien PLC go up and down completely randomly.

Pair Corralation between DFS Furniture and Versarien PLC

Assuming the 90 days trading horizon DFS Furniture PLC is expected to under-perform the Versarien PLC. But the stock apears to be less risky and, when comparing its historical volatility, DFS Furniture PLC is 2.02 times less risky than Versarien PLC. The stock trades about -0.03 of its potential returns per unit of risk. The Versarien PLC is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3.30  in Versarien PLC on October 25, 2024 and sell it today you would earn a total of  0.15  from holding Versarien PLC or generate 4.55% return on investment over 90 days.

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

DFS Furniture PLC  vs.  Versarien PLC

DFS Furniture PLC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DFS Furniture PLC are ranked lower than 4 (%) 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.

Versarien PLC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Versarien PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Versarien 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 Versarien PLC

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

The idea behind DFS Furniture PLC and Versarien 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.

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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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.