Correlation Between Fortune Brands and DFS Furniture
Can any of the company-specific risk be diversified away by investing in both Fortune Brands 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 Fortune Brands and DFS Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fortune Brands Home and DFS Furniture PLC, you can compare the effects of market volatilities on Fortune Brands 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 Fortune Brands with a short position of DFS Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortune Brands and DFS Furniture.
Diversification Opportunities for Fortune Brands and DFS Furniture
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Fortune and DFS is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Fortune Brands Home 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 Fortune Brands 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 Fortune Brands Home 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 Fortune Brands i.e., Fortune Brands and DFS Furniture go up and down completely randomly.
Pair Corralation between Fortune Brands and DFS Furniture
Assuming the 90 days trading horizon Fortune Brands Home is expected to under-perform the DFS Furniture. But the stock apears to be less risky and, when comparing its historical volatility, Fortune Brands Home is 1.31 times less risky than DFS Furniture. The stock trades about -0.38 of its potential returns per unit of risk. The DFS Furniture PLC is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 13,500 in DFS Furniture PLC on August 26, 2024 and sell it today you would earn a total of 0.00 from holding DFS Furniture PLC or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fortune Brands Home vs. DFS Furniture PLC
Performance |
| Timeline |
| Fortune Brands Home |
| DFS Furniture PLC |
Fortune Brands and DFS Furniture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fortune Brands and DFS Furniture
The main advantage of trading using opposite Fortune Brands and DFS Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortune Brands 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.| Fortune Brands vs. Alior Bank SA | Fortune Brands vs. OneSavings Bank PLC | Fortune Brands vs. Komercni Banka | Fortune Brands vs. Kaufman Et Broad |
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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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