Correlation Between DFS Furniture and CHINA EDUCATION
Can any of the company-specific risk be diversified away by investing in both DFS Furniture and CHINA EDUCATION 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 CHINA EDUCATION 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 CHINA EDUCATION GROUP, you can compare the effects of market volatilities on DFS Furniture and CHINA EDUCATION 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 CHINA EDUCATION. Check out your portfolio center. Please also check ongoing floating volatility patterns of DFS Furniture and CHINA EDUCATION.
Diversification Opportunities for DFS Furniture and CHINA EDUCATION
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between DFS and CHINA is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding DFS Furniture PLC and CHINA EDUCATION GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA EDUCATION GROUP 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 CHINA EDUCATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA EDUCATION GROUP has no effect on the direction of DFS Furniture i.e., DFS Furniture and CHINA EDUCATION go up and down completely randomly.
Pair Corralation between DFS Furniture and CHINA EDUCATION
Assuming the 90 days trading horizon DFS Furniture is expected to generate 1.78 times less return on investment than CHINA EDUCATION. But when comparing it to its historical volatility, DFS Furniture PLC is 1.64 times less risky than CHINA EDUCATION. It trades about 0.04 of its potential returns per unit of risk. CHINA EDUCATION GROUP is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 32.00 in CHINA EDUCATION GROUP on August 28, 2024 and sell it today you would earn a total of 13.00 from holding CHINA EDUCATION GROUP or generate 40.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.72% |
| Values | Daily Returns |
DFS Furniture PLC vs. CHINA EDUCATION GROUP
Performance |
| Timeline |
| DFS Furniture PLC |
| CHINA EDUCATION GROUP |
DFS Furniture and CHINA EDUCATION Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DFS Furniture and CHINA EDUCATION
The main advantage of trading using opposite DFS Furniture and CHINA EDUCATION positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DFS Furniture position performs unexpectedly, CHINA EDUCATION 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 CHINA EDUCATION will offset losses from the drop in CHINA EDUCATION's long position.| DFS Furniture vs. Sunny Optical Technology | DFS Furniture vs. CITY OFFICE REIT | DFS Furniture vs. Luckin Coffee | DFS Furniture vs. SWISS WATER DECAFFCOFFEE |
| CHINA EDUCATION vs. Choice Hotels International | CHINA EDUCATION vs. Wyndham Hotels Resorts | CHINA EDUCATION vs. FIREWEED METALS P | CHINA EDUCATION vs. PARKEN Sport Entertainment |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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