Correlation Between Various Eateries and DFS Furniture

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

By analyzing existing cross correlation between Various Eateries PLC and DFS Furniture PLC, you can compare the effects of market volatilities on Various Eateries and DFS Furniture 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 Various Eateries with a short position of DFS Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Various Eateries and DFS Furniture.

Diversification Opportunities for Various Eateries and DFS Furniture

-0.48

Correlation Coefficient

Various Eateries  DFS Furniture

Very good diversification

The 3 months correlation between Various and DFS is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Various Eateries PLC and DFS Furniture PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DFS Furniture PLC and Various Eateries 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 Various Eateries PLC are associated (or correlated) with DFS Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DFS Furniture PLC has no effect on the direction of Various Eateries i.e., Various Eateries and DFS Furniture go up and down completely randomly.

Pair Corralation between Various Eateries and DFS Furniture

Assuming the 90 days trading horizon Various Eateries PLC is expected to under-perform the DFS Furniture. But the stock apears to be less risky and, when comparing its historical volatility, Various Eateries PLC is 5.67 times less risky than DFS Furniture. The stock trades about -0.12 of its potential returns per unit of risk. The DFS Furniture PLC is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  11,960  in DFS Furniture PLC on September 12, 2024 and sell it today you would earn a total of  2,540  from holding DFS Furniture PLC or generate 21.24% return on investment over 90 days.

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

Various Eateries PLC  vs.  DFS Furniture PLC

Various Eateries PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Various Eateries PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Various Eateries is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

DFS Furniture PLC

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DFS Furniture PLC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, DFS Furniture exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Various Eateries and DFS Furniture

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

The idea behind Various Eateries PLC and DFS Furniture 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.