Correlation Between DFS Furniture and Lifeway Foods
Can any of the company-specific risk be diversified away by investing in both DFS Furniture and Lifeway Foods 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 Lifeway Foods 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 Lifeway Foods, you can compare the effects of market volatilities on DFS Furniture and Lifeway Foods 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 Lifeway Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of DFS Furniture and Lifeway Foods.
Diversification Opportunities for DFS Furniture and Lifeway Foods
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between DFS and Lifeway is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding DFS Furniture PLC and Lifeway Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifeway Foods 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 Lifeway Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifeway Foods has no effect on the direction of DFS Furniture i.e., DFS Furniture and Lifeway Foods go up and down completely randomly.
Pair Corralation between DFS Furniture and Lifeway Foods
Assuming the 90 days trading horizon DFS Furniture PLC is expected to generate 0.36 times more return on investment than Lifeway Foods. However, DFS Furniture PLC is 2.78 times less risky than Lifeway Foods. It trades about 0.11 of its potential returns per unit of risk. Lifeway Foods is currently generating about -0.01 per unit of risk. If you would invest 155.00 in DFS Furniture PLC on September 1, 2024 and sell it today you would earn a total of 7.00 from holding DFS Furniture PLC or generate 4.52% 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. Lifeway Foods
Performance |
| Timeline |
| DFS Furniture PLC |
| Lifeway Foods |
DFS Furniture and Lifeway Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DFS Furniture and Lifeway Foods
The main advantage of trading using opposite DFS Furniture and Lifeway Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DFS Furniture position performs unexpectedly, Lifeway Foods 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 Lifeway Foods will offset losses from the drop in Lifeway Foods' long position.| DFS Furniture vs. Apple Inc | DFS Furniture vs. Apple Inc | DFS Furniture vs. Apple Inc | DFS Furniture vs. Apple Inc |
| Lifeway Foods vs. ScanSource | Lifeway Foods vs. Waste Management | Lifeway Foods vs. Brockhaus Capital Management | Lifeway Foods vs. Consolidated Communications Holdings |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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