Correlation Between Dixons Carphone and Entain DRC

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

Diversification Opportunities for Dixons Carphone and Entain DRC

-0.29

Correlation Coefficient

Dixons Carphone  Entain DRC

Very good diversification

The 3 months correlation between Dixons and Entain is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Dixons Carphone plc and Entain DRC PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entain DRC PLC 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 Entain DRC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entain DRC PLC has no effect on the direction of Dixons Carphone i.e., Dixons Carphone and Entain DRC go up and down completely randomly.

Pair Corralation between Dixons Carphone and Entain DRC

Assuming the 90 days horizon Dixons Carphone plc is expected to generate 0.87 times more return on investment than Entain DRC. However, Dixons Carphone plc is 1.15 times less risky than Entain DRC. It trades about 0.05 of its potential returns per unit of risk. Entain DRC PLC is currently generating about -0.1 per unit of risk. If you would invest  112.00  in Dixons Carphone plc on September 26, 2024 and sell it today you would earn a total of  6.00  from holding Dixons Carphone plc or generate 5.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.92%
Values	Daily Returns

Dixons Carphone plc  vs.  Entain DRC PLC

Dixons Carphone plc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dixons Carphone plc are ranked lower than 3 (%) 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.

Entain DRC PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Entain DRC PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Dixons Carphone and Entain DRC

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

The idea behind Dixons Carphone plc and Entain DRC 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.