Correlation Between Alfa Financial and DFS Furniture
Can any of the company-specific risk be diversified away by investing in both Alfa Financial 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 Alfa Financial and DFS Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alfa Financial Software and DFS Furniture PLC, you can compare the effects of market volatilities on Alfa Financial 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 Alfa Financial with a short position of DFS Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alfa Financial and DFS Furniture.
Diversification Opportunities for Alfa Financial and DFS Furniture
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Alfa and DFS is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Alfa Financial Software 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 Alfa Financial 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 Alfa Financial Software 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 Alfa Financial i.e., Alfa Financial and DFS Furniture go up and down completely randomly.
Pair Corralation between Alfa Financial and DFS Furniture
Assuming the 90 days trading horizon Alfa Financial is expected to generate 1.05 times less return on investment than DFS Furniture. But when comparing it to its historical volatility, Alfa Financial Software is 1.07 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 0.08 of returns per unit of risk over similar time horizon. If you would invest 9,578 in DFS Furniture PLC on September 14, 2024 and sell it today you would earn a total of 4,822 from holding DFS Furniture PLC or generate 50.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.63% |
| Values | Daily Returns |
Alfa Financial Software vs. DFS Furniture PLC
Performance |
| Timeline |
| Alfa Financial Software |
| DFS Furniture PLC |
Alfa Financial and DFS Furniture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alfa Financial and DFS Furniture
The main advantage of trading using opposite Alfa Financial and DFS Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alfa Financial 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.| Alfa Financial vs. National Beverage Corp | Alfa Financial vs. Tyson Foods Cl | Alfa Financial vs. McEwen Mining | Alfa Financial vs. Anglesey Mining |
| DFS Furniture vs. Discover Financial Services | DFS Furniture vs. Take Two Interactive Software | DFS Furniture vs. Alfa Financial Software | DFS Furniture vs. OneSavings Bank PLC |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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