Correlation Between American Homes and DFS Furniture
Can any of the company-specific risk be diversified away by investing in both American Homes 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 American Homes and DFS Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Homes 4 and DFS Furniture PLC, you can compare the effects of market volatilities on American Homes 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 American Homes with a short position of DFS Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Homes and DFS Furniture.
Diversification Opportunities for American Homes and DFS Furniture
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between American and DFS is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding American Homes 4 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 American Homes 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 American Homes 4 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 American Homes i.e., American Homes and DFS Furniture go up and down completely randomly.
Pair Corralation between American Homes and DFS Furniture
Assuming the 90 days trading horizon American Homes is expected to generate 2.17 times less return on investment than DFS Furniture. But when comparing it to its historical volatility, American Homes 4 is 1.7 times less risky than DFS Furniture. It trades about 0.06 of its potential returns per unit of risk. DFS Furniture PLC is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 11,400 in DFS Furniture PLC on August 31, 2024 and sell it today you would earn a total of 2,340 from holding DFS Furniture PLC or generate 20.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 96.88% |
| Values | Daily Returns |
American Homes 4 vs. DFS Furniture PLC
Performance |
| Timeline |
| American Homes 4 |
| DFS Furniture PLC |
American Homes and DFS Furniture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Homes and DFS Furniture
The main advantage of trading using opposite American Homes and DFS Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Homes 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.| American Homes vs. Neometals | American Homes vs. Coor Service Management | American Homes vs. Aeorema Communications Plc | American Homes vs. JLEN Environmental Assets |
| DFS Furniture vs. Berkshire Hathaway | DFS Furniture vs. Hyundai Motor | DFS Furniture vs. Samsung Electronics Co | DFS Furniture vs. Samsung Electronics Co |
Check out your portfolio center.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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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