Correlation Between Avanos Medical and DFS Furniture
Can any of the company-specific risk be diversified away by investing in both Avanos Medical 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 Avanos Medical and DFS Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Avanos Medical and DFS Furniture PLC, you can compare the effects of market volatilities on Avanos Medical 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 Avanos Medical with a short position of DFS Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avanos Medical and DFS Furniture.
Diversification Opportunities for Avanos Medical and DFS Furniture
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Avanos and DFS is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Avanos Medical 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 Avanos Medical 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 Avanos Medical 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 Avanos Medical i.e., Avanos Medical and DFS Furniture go up and down completely randomly.
Pair Corralation between Avanos Medical and DFS Furniture
Assuming the 90 days trading horizon Avanos Medical is expected to under-perform the DFS Furniture. But the stock apears to be less risky and, when comparing its historical volatility, Avanos Medical is 1.16 times less risky than DFS Furniture. The stock trades about -0.02 of its potential returns per unit of risk. The DFS Furniture PLC is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 125.00 in DFS Furniture PLC on August 31, 2024 and sell it today you would earn a total of 37.00 from holding DFS Furniture PLC or generate 29.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Avanos Medical vs. DFS Furniture PLC
Performance |
| Timeline |
| Avanos Medical |
| DFS Furniture PLC |
Avanos Medical and DFS Furniture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avanos Medical and DFS Furniture
The main advantage of trading using opposite Avanos Medical and DFS Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avanos Medical 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.| Avanos Medical vs. Apple Inc | Avanos Medical vs. Apple Inc | Avanos Medical vs. Apple Inc | Avanos Medical vs. Apple Inc |
| DFS Furniture vs. Apple Inc | DFS Furniture vs. Apple Inc | DFS Furniture vs. Apple Inc | DFS Furniture vs. Apple Inc |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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