Correlation Between DFS Furniture and LANDSEA HOMES
Can any of the company-specific risk be diversified away by investing in both DFS Furniture and LANDSEA HOMES 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 LANDSEA HOMES 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 LANDSEA HOMES P, you can compare the effects of market volatilities on DFS Furniture and LANDSEA HOMES 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 LANDSEA HOMES. Check out your portfolio center. Please also check ongoing floating volatility patterns of DFS Furniture and LANDSEA HOMES.
Diversification Opportunities for DFS Furniture and LANDSEA HOMES
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between DFS and LANDSEA is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding DFS Furniture PLC and LANDSEA HOMES P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LANDSEA HOMES P 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 LANDSEA HOMES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LANDSEA HOMES P has no effect on the direction of DFS Furniture i.e., DFS Furniture and LANDSEA HOMES go up and down completely randomly.
Pair Corralation between DFS Furniture and LANDSEA HOMES
Assuming the 90 days trading horizon DFS Furniture PLC is expected to generate 0.88 times more return on investment than LANDSEA HOMES. However, DFS Furniture PLC is 1.14 times less risky than LANDSEA HOMES. It trades about 0.04 of its potential returns per unit of risk. LANDSEA HOMES P is currently generating about 0.03 per unit of risk. If you would invest 121.00 in DFS Furniture PLC on August 29, 2024 and sell it today you would earn a total of 36.00 from holding DFS Furniture PLC or generate 29.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
DFS Furniture PLC vs. LANDSEA HOMES P
Performance |
| Timeline |
| DFS Furniture PLC |
| LANDSEA HOMES P |
DFS Furniture and LANDSEA HOMES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DFS Furniture and LANDSEA HOMES
The main advantage of trading using opposite DFS Furniture and LANDSEA HOMES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DFS Furniture position performs unexpectedly, LANDSEA HOMES 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 LANDSEA HOMES will offset losses from the drop in LANDSEA HOMES's long position.| DFS Furniture vs. Apple Inc | DFS Furniture vs. Apple Inc | DFS Furniture vs. Apple Inc | DFS Furniture vs. Apple Inc |
| LANDSEA HOMES vs. Superior Plus Corp | LANDSEA HOMES vs. NMI Holdings | LANDSEA HOMES vs. SIVERS SEMICONDUCTORS AB | LANDSEA HOMES vs. Talanx AG |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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