Correlation Between DFS Furniture and INNOVATEC SPA
Can any of the company-specific risk be diversified away by investing in both DFS Furniture and INNOVATEC SPA 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 INNOVATEC SPA 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 INNOVATEC SPA, you can compare the effects of market volatilities on DFS Furniture and INNOVATEC SPA 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 INNOVATEC SPA. Check out your portfolio center. Please also check ongoing floating volatility patterns of DFS Furniture and INNOVATEC SPA.
Diversification Opportunities for DFS Furniture and INNOVATEC SPA
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between DFS and INNOVATEC is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding DFS Furniture PLC and INNOVATEC SPA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INNOVATEC SPA 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 INNOVATEC SPA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INNOVATEC SPA has no effect on the direction of DFS Furniture i.e., DFS Furniture and INNOVATEC SPA go up and down completely randomly.
Pair Corralation between DFS Furniture and INNOVATEC SPA
Assuming the 90 days trading horizon DFS Furniture PLC is expected to generate 0.5 times more return on investment than INNOVATEC SPA. However, DFS Furniture PLC is 1.99 times less risky than INNOVATEC SPA. It trades about 0.02 of its potential returns per unit of risk. INNOVATEC SPA is currently generating about -0.03 per unit of risk. If you would invest 158.00 in DFS Furniture PLC on October 25, 2024 and sell it today you would earn a total of 4.00 from holding DFS Furniture PLC or generate 2.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
DFS Furniture PLC vs. INNOVATEC SPA
Performance |
| Timeline |
| DFS Furniture PLC |
| INNOVATEC SPA |
DFS Furniture and INNOVATEC SPA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DFS Furniture and INNOVATEC SPA
The main advantage of trading using opposite DFS Furniture and INNOVATEC SPA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DFS Furniture position performs unexpectedly, INNOVATEC SPA 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 INNOVATEC SPA will offset losses from the drop in INNOVATEC SPA's long position.| DFS Furniture vs. Fevertree Drinks PLC | DFS Furniture vs. Monster Beverage Corp | DFS Furniture vs. Insteel Industries | DFS Furniture vs. MOLSON RS BEVERAGE |
| INNOVATEC SPA vs. DICKER DATA LTD | INNOVATEC SPA vs. Synchrony Financial | INNOVATEC SPA vs. REVO INSURANCE SPA | INNOVATEC SPA vs. S E BANKEN A |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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