Correlation Between DFS Furniture and DAIMLER TRUCK
Can any of the company-specific risk be diversified away by investing in both DFS Furniture and DAIMLER TRUCK 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 DAIMLER TRUCK 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 DAIMLER TRUCK SPADS12, you can compare the effects of market volatilities on DFS Furniture and DAIMLER TRUCK 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 DAIMLER TRUCK. Check out your portfolio center. Please also check ongoing floating volatility patterns of DFS Furniture and DAIMLER TRUCK.
Diversification Opportunities for DFS Furniture and DAIMLER TRUCK
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between DFS and DAIMLER is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding DFS Furniture PLC and DAIMLER TRUCK SPADS12 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DAIMLER TRUCK SPADS12 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 DAIMLER TRUCK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DAIMLER TRUCK SPADS12 has no effect on the direction of DFS Furniture i.e., DFS Furniture and DAIMLER TRUCK go up and down completely randomly.
Pair Corralation between DFS Furniture and DAIMLER TRUCK
Assuming the 90 days trading horizon DFS Furniture PLC is expected to generate 0.65 times more return on investment than DAIMLER TRUCK. However, DFS Furniture PLC is 1.53 times less risky than DAIMLER TRUCK. It trades about 0.28 of its potential returns per unit of risk. DAIMLER TRUCK SPADS12 is currently generating about 0.04 per unit of risk. If you would invest 151.00 in DFS Furniture PLC on September 13, 2024 and sell it today you would earn a total of 15.00 from holding DFS Furniture PLC or generate 9.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
DFS Furniture PLC vs. DAIMLER TRUCK SPADS12
Performance |
| Timeline |
| DFS Furniture PLC |
| DAIMLER TRUCK SPADS12 |
DFS Furniture and DAIMLER TRUCK Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DFS Furniture and DAIMLER TRUCK
The main advantage of trading using opposite DFS Furniture and DAIMLER TRUCK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DFS Furniture position performs unexpectedly, DAIMLER TRUCK 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 DAIMLER TRUCK will offset losses from the drop in DAIMLER TRUCK's long position.| DFS Furniture vs. Apple Inc | DFS Furniture vs. Apple Inc | DFS Furniture vs. Apple Inc | DFS Furniture vs. Apple Inc |
| DAIMLER TRUCK vs. TYSON FOODS A | DAIMLER TRUCK vs. Food Life Companies | DAIMLER TRUCK vs. Performance Food Group | DAIMLER TRUCK vs. National Beverage Corp |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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