Correlation Between Gap, and Dixons Carphone

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

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

Diversification Opportunities for Gap, and Dixons Carphone

-0.27

Correlation Coefficient

Gap,  Dixons Carphone

Very good diversification

The 3 months correlation between Gap, and Dixons is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding The Gap, and Dixons Carphone plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dixons Carphone plc and Gap, 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 The Gap, are associated (or correlated) with Dixons Carphone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dixons Carphone plc has no effect on the direction of Gap, i.e., Gap, and Dixons Carphone go up and down completely randomly.

Pair Corralation between Gap, and Dixons Carphone

Considering the 90-day investment horizon The Gap, is expected to generate 1.08 times more return on investment than Dixons Carphone. However, Gap, is 1.08 times more volatile than Dixons Carphone plc. It trades about 0.05 of its potential returns per unit of risk. Dixons Carphone plc is currently generating about 0.03 per unit of risk. If you would invest  1,301  in The Gap, on October 6, 2024 and sell it today you would earn a total of  1,121  from holding The Gap, or generate 86.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.58%
Values	Daily Returns

The Gap,  vs.  Dixons Carphone plc

Gap,

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Gap, are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Gap, reported solid returns over the last few months and may actually be approaching a breakup point.

Dixons Carphone plc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dixons Carphone plc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Dixons Carphone is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Gap, and Dixons Carphone

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

The idea behind The Gap, and Dixons Carphone 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.