Correlation Between Village Super and Dixons Carphone

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

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

Diversification Opportunities for Village Super and Dixons Carphone

-0.33

Correlation Coefficient

Village Super  Dixons Carphone

Very good diversification

The 3 months correlation between Village and Dixons is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Village Super Market 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 Village Super 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 Village Super Market 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 Village Super i.e., Village Super and Dixons Carphone go up and down completely randomly.

Pair Corralation between Village Super and Dixons Carphone

Assuming the 90 days horizon Village Super is expected to generate 34.5 times less return on investment than Dixons Carphone. But when comparing it to its historical volatility, Village Super Market is 2.04 times less risky than Dixons Carphone. It trades about 0.01 of its potential returns per unit of risk. Dixons Carphone plc is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  102.00  in Dixons Carphone plc on September 24, 2024 and sell it today you would earn a total of  16.00  from holding Dixons Carphone plc or generate 15.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Village Super Market  vs.  Dixons Carphone plc

Village Super Market

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Village Super Market are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Village Super is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Dixons Carphone plc

Risk-Adjusted Performance

3 of 100

Modest

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 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 Village Super and Dixons Carphone

The main advantage of trading using opposite Village Super and Dixons Carphone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Village Super 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 Village Super Market 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.