Correlation Between Scholastic and Dixons Carphone

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

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

Diversification Opportunities for Scholastic and Dixons Carphone

-0.58

Correlation Coefficient

Scholastic  Dixons Carphone

Excellent diversification

The 3 months correlation between Scholastic and Dixons is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Scholastic 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 Scholastic 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 Scholastic 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 Scholastic i.e., Scholastic and Dixons Carphone go up and down completely randomly.

Pair Corralation between Scholastic and Dixons Carphone

Given the investment horizon of 90 days Scholastic is expected to under-perform the Dixons Carphone. In addition to that, Scholastic is 1.81 times more volatile than Dixons Carphone plc. It trades about -0.11 of its total potential returns per unit of risk. Dixons Carphone plc is currently generating about 0.17 per unit of volatility. If you would invest  101.00  in Dixons Carphone plc on October 21, 2024 and sell it today you would earn a total of  17.00  from holding Dixons Carphone plc or generate 16.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	93.02%
Values	Daily Returns

Scholastic  vs.  Dixons Carphone plc

Scholastic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Scholastic has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

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 recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Scholastic and Dixons Carphone

The main advantage of trading using opposite Scholastic and Dixons Carphone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scholastic 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 Scholastic 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 Global Correlations module to find global opportunities by holding instruments from different markets.