Correlation Between DFS Furniture and ABB
Can any of the company-specific risk be diversified away by investing in both DFS Furniture and ABB 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 ABB 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 ABB, you can compare the effects of market volatilities on DFS Furniture and ABB 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 ABB. Check out your portfolio center. Please also check ongoing floating volatility patterns of DFS Furniture and ABB.
Diversification Opportunities for DFS Furniture and ABB
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between DFS and ABB is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding DFS Furniture PLC and ABB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABB 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 ABB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABB has no effect on the direction of DFS Furniture i.e., DFS Furniture and ABB go up and down completely randomly.
Pair Corralation between DFS Furniture and ABB
Assuming the 90 days trading horizon DFS Furniture is expected to generate 1.21 times less return on investment than ABB. In addition to that, DFS Furniture is 1.52 times more volatile than ABB. It trades about 0.04 of its total potential returns per unit of risk. ABB is currently generating about 0.07 per unit of volatility. If you would invest 3,439 in ABB on September 4, 2024 and sell it today you would earn a total of 2,011 from holding ABB or generate 58.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
DFS Furniture PLC vs. ABB
Performance |
| Timeline |
| DFS Furniture PLC |
| ABB |
DFS Furniture and ABB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DFS Furniture and ABB
The main advantage of trading using opposite DFS Furniture and ABB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DFS Furniture position performs unexpectedly, ABB 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 ABB will offset losses from the drop in ABB's long position.| DFS Furniture vs. Apple Inc | DFS Furniture vs. Apple Inc | DFS Furniture vs. Apple Inc | DFS Furniture vs. Apple Inc |
| ABB vs. Harmony Gold Mining | ABB vs. Axcelis Technologies | ABB vs. MOVIE GAMES SA | ABB vs. MCEWEN MINING INC |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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