Correlation Between Dream Office and Leons Furniture
Can any of the company-specific risk be diversified away by investing in both Dream Office and Leons 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 Dream Office and Leons Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dream Office Real and Leons Furniture Limited, you can compare the effects of market volatilities on Dream Office and Leons 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 Dream Office with a short position of Leons Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dream Office and Leons Furniture.
Diversification Opportunities for Dream Office and Leons Furniture
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dream and Leons is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Dream Office Real and Leons Furniture Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leons Furniture and Dream Office 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 Dream Office Real are associated (or correlated) with Leons Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leons Furniture has no effect on the direction of Dream Office i.e., Dream Office and Leons Furniture go up and down completely randomly.
Pair Corralation between Dream Office and Leons Furniture
Assuming the 90 days trading horizon Dream Office Real is expected to under-perform the Leons Furniture. In addition to that, Dream Office is 1.37 times more volatile than Leons Furniture Limited. It trades about -0.02 of its total potential returns per unit of risk. Leons Furniture Limited is currently generating about 0.05 per unit of volatility. If you would invest 2,028 in Leons Furniture Limited on September 12, 2024 and sell it today you would earn a total of 632.00 from holding Leons Furniture Limited or generate 31.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dream Office Real vs. Leons Furniture Limited
Performance |
| Timeline |
| Dream Office Real |
| Leons Furniture |
Dream Office and Leons Furniture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dream Office and Leons Furniture
The main advantage of trading using opposite Dream Office and Leons Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dream Office position performs unexpectedly, Leons 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 Leons Furniture will offset losses from the drop in Leons Furniture's long position.| Dream Office vs. InterRent Real Estate | Dream Office vs. Canadian Apartment Properties | Dream Office vs. Granite Real Estate | Dream Office vs. Crombie Real Estate |
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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 Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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