Correlation Between Chevron and DFS Furniture
Can any of the company-specific risk be diversified away by investing in both Chevron 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 Chevron and DFS Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chevron and DFS Furniture PLC, you can compare the effects of market volatilities on Chevron 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 Chevron with a short position of DFS Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chevron and DFS Furniture.
Diversification Opportunities for Chevron and DFS Furniture
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chevron and DFS is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Chevron 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 Chevron 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 Chevron 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 Chevron i.e., Chevron and DFS Furniture go up and down completely randomly.
Pair Corralation between Chevron and DFS Furniture
Assuming the 90 days horizon Chevron is expected to generate 0.7 times more return on investment than DFS Furniture. However, Chevron is 1.43 times less risky than DFS Furniture. It trades about 0.33 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 13,983 in Chevron on September 4, 2024 and sell it today you would earn a total of 1,423 from holding Chevron or generate 10.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chevron vs. DFS Furniture PLC
Performance |
| Timeline |
| Chevron |
| DFS Furniture PLC |
Chevron and DFS Furniture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chevron and DFS Furniture
The main advantage of trading using opposite Chevron and DFS Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chevron 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.| Chevron vs. DFS Furniture PLC | Chevron vs. Digilife Technologies Limited | Chevron vs. NetSol Technologies | Chevron vs. ORMAT TECHNOLOGIES |
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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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