Correlation Between Dixons Carphone and Boomer Holdings

Can any of the company-specific risk be diversified away by investing in both Dixons Carphone and Boomer Holdings 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 Dixons Carphone and Boomer Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dixons Carphone plc and Boomer Holdings, you can compare the effects of market volatilities on Dixons Carphone and Boomer Holdings 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 Dixons Carphone with a short position of Boomer Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dixons Carphone and Boomer Holdings.

Diversification Opportunities for Dixons Carphone and Boomer Holdings

0.31

Correlation Coefficient

Dixons Carphone  Boomer Holdings

Weak diversification

The 3 months correlation between Dixons and Boomer is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Dixons Carphone plc and Boomer Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boomer Holdings and Dixons Carphone 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 Dixons Carphone plc are associated (or correlated) with Boomer Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boomer Holdings has no effect on the direction of Dixons Carphone i.e., Dixons Carphone and Boomer Holdings go up and down completely randomly.

Pair Corralation between Dixons Carphone and Boomer Holdings

Assuming the 90 days horizon Dixons Carphone plc is expected to generate 0.4 times more return on investment than Boomer Holdings. However, Dixons Carphone plc is 2.51 times less risky than Boomer Holdings. It trades about 0.05 of its potential returns per unit of risk. Boomer Holdings is currently generating about -0.1 per unit of risk. If you would invest  70.00  in Dixons Carphone plc on September 22, 2024 and sell it today you would earn a total of  48.00  from holding Dixons Carphone plc or generate 68.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	23.49%
Values	Daily Returns

Dixons Carphone plc  vs.  Boomer Holdings

Dixons Carphone plc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dixons Carphone plc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Dixons Carphone may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Boomer Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boomer Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong primary indicators, Boomer Holdings is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Dixons Carphone and Boomer Holdings

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

The idea behind Dixons Carphone plc and Boomer Holdings 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.