Correlation Between DFS Furniture and Home Depot
Can any of the company-specific risk be diversified away by investing in both DFS Furniture and Home Depot 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 Home Depot 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 The Home Depot, you can compare the effects of market volatilities on DFS Furniture and Home Depot 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 Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of DFS Furniture and Home Depot.
Diversification Opportunities for DFS Furniture and Home Depot
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between DFS and Home is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding DFS Furniture PLC and The Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot 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 Home Depot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Depot has no effect on the direction of DFS Furniture i.e., DFS Furniture and Home Depot go up and down completely randomly.
Pair Corralation between DFS Furniture and Home Depot
Assuming the 90 days trading horizon DFS Furniture is expected to generate 17.23 times less return on investment than Home Depot. In addition to that, DFS Furniture is 1.5 times more volatile than The Home Depot. It trades about 0.01 of its total potential returns per unit of risk. The Home Depot is currently generating about 0.27 per unit of volatility. If you would invest 37,225 in The Home Depot on August 29, 2024 and sell it today you would earn a total of 3,295 from holding The Home Depot or generate 8.85% 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. The Home Depot
Performance |
| Timeline |
| DFS Furniture PLC |
| Home Depot |
DFS Furniture and Home Depot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DFS Furniture and Home Depot
The main advantage of trading using opposite DFS Furniture and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DFS Furniture position performs unexpectedly, Home Depot 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 Home Depot will offset losses from the drop in Home Depot'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 |
| Home Depot vs. Superior Plus Corp | Home Depot vs. NMI Holdings | Home Depot vs. Origin Agritech | Home Depot vs. SIVERS SEMICONDUCTORS AB |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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