Correlation Between Northland Power and DFS Furniture
Can any of the company-specific risk be diversified away by investing in both Northland Power 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 Northland Power and DFS Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northland Power and DFS Furniture PLC, you can compare the effects of market volatilities on Northland Power 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 Northland Power with a short position of DFS Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northland Power and DFS Furniture.
Diversification Opportunities for Northland Power and DFS Furniture
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Northland and DFS is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Northland Power 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 Northland Power 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 Northland Power 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 Northland Power i.e., Northland Power and DFS Furniture go up and down completely randomly.
Pair Corralation between Northland Power and DFS Furniture
Assuming the 90 days horizon Northland Power is expected to generate 0.95 times more return on investment than DFS Furniture. However, Northland Power is 1.05 times less risky than DFS Furniture. It trades about 0.08 of its potential returns per unit of risk. DFS Furniture PLC is currently generating about 0.06 per unit of risk. If you would invest 1,233 in Northland Power on October 23, 2024 and sell it today you would earn a total of 42.00 from holding Northland Power or generate 3.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 94.12% |
| Values | Daily Returns |
Northland Power vs. DFS Furniture PLC
Performance |
| Timeline |
| Northland Power |
| DFS Furniture PLC |
Northland Power and DFS Furniture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northland Power and DFS Furniture
The main advantage of trading using opposite Northland Power and DFS Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northland Power 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.| Northland Power vs. DFS Furniture PLC | Northland Power vs. ecotel communication ag | Northland Power vs. CITY OFFICE REIT | Northland Power vs. Entravision Communications |
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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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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