Correlation Between Applied Materials and DFS Furniture
Can any of the company-specific risk be diversified away by investing in both Applied Materials 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 Applied Materials and DFS Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and DFS Furniture PLC, you can compare the effects of market volatilities on Applied Materials 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 Applied Materials with a short position of DFS Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and DFS Furniture.
Diversification Opportunities for Applied Materials and DFS Furniture
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Applied and DFS is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials 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 Applied Materials 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 Applied Materials 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 Applied Materials i.e., Applied Materials and DFS Furniture go up and down completely randomly.
Pair Corralation between Applied Materials and DFS Furniture
Assuming the 90 days trading horizon Applied Materials is expected to generate 1.38 times more return on investment than DFS Furniture. However, Applied Materials is 1.38 times more volatile than DFS Furniture PLC. It trades about 0.07 of its potential returns per unit of risk. DFS Furniture PLC is currently generating about -0.08 per unit of risk. If you would invest 17,957 in Applied Materials on November 7, 2024 and sell it today you would earn a total of 678.00 from holding Applied Materials or generate 3.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Materials vs. DFS Furniture PLC
Performance |
| Timeline |
| Applied Materials |
| DFS Furniture PLC |
Applied Materials and DFS Furniture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and DFS Furniture
The main advantage of trading using opposite Applied Materials and DFS Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials 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.| Applied Materials vs. Pentair PLC | Applied Materials vs. Systemair AB | Applied Materials vs. United Utilities Group | Applied Materials vs. Alaska Air Group |
| DFS Furniture vs. Erste Group Bank | DFS Furniture vs. Cars Inc | DFS Furniture vs. Bankers Investment Trust | DFS Furniture vs. Litigation Capital Management |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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