Correlation Between DFS Furniture and Sumitomo Rubber
Can any of the company-specific risk be diversified away by investing in both DFS Furniture and Sumitomo Rubber 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 DFS Furniture and Sumitomo Rubber into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DFS Furniture PLC and Sumitomo Rubber Industries, you can compare the effects of market volatilities on DFS Furniture and Sumitomo Rubber 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 DFS Furniture with a short position of Sumitomo Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of DFS Furniture and Sumitomo Rubber.
Diversification Opportunities for DFS Furniture and Sumitomo Rubber
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between DFS and Sumitomo is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding DFS Furniture PLC and Sumitomo Rubber Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Rubber Indu and DFS Furniture 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 DFS Furniture PLC are associated (or correlated) with Sumitomo Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Rubber Indu has no effect on the direction of DFS Furniture i.e., DFS Furniture and Sumitomo Rubber go up and down completely randomly.
Pair Corralation between DFS Furniture and Sumitomo Rubber
Assuming the 90 days trading horizon DFS Furniture PLC is expected to under-perform the Sumitomo Rubber. In addition to that, DFS Furniture is 1.72 times more volatile than Sumitomo Rubber Industries. It trades about -0.07 of its total potential returns per unit of risk. Sumitomo Rubber Industries is currently generating about 0.11 per unit of volatility. If you would invest 1,050 in Sumitomo Rubber Industries on November 8, 2024 and sell it today you would earn a total of 60.00 from holding Sumitomo Rubber Industries or generate 5.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
DFS Furniture PLC vs. Sumitomo Rubber Industries
Performance |
| Timeline |
| DFS Furniture PLC |
| Sumitomo Rubber Indu |
DFS Furniture and Sumitomo Rubber Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DFS Furniture and Sumitomo Rubber
The main advantage of trading using opposite DFS Furniture and Sumitomo Rubber positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DFS Furniture position performs unexpectedly, Sumitomo Rubber 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 Sumitomo Rubber will offset losses from the drop in Sumitomo Rubber's long position.| DFS Furniture vs. Wayside Technology Group | DFS Furniture vs. Align Technology | DFS Furniture vs. PACIFIC ONLINE | DFS Furniture vs. GEAR4MUSIC LS 10 |
| Sumitomo Rubber vs. Planet Fitness | Sumitomo Rubber vs. Kingdee International Software | Sumitomo Rubber vs. VITEC SOFTWARE GROUP | Sumitomo Rubber vs. NAKED WINES 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 Transaction History module to view history of all your transactions and understand their impact on performance.
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