Correlation Between DFS Furniture and MAGNA INTL
Can any of the company-specific risk be diversified away by investing in both DFS Furniture and MAGNA INTL 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 MAGNA INTL 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 MAGNA INTL, you can compare the effects of market volatilities on DFS Furniture and MAGNA INTL 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 MAGNA INTL. Check out your portfolio center. Please also check ongoing floating volatility patterns of DFS Furniture and MAGNA INTL.
Diversification Opportunities for DFS Furniture and MAGNA INTL
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between DFS and MAGNA is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding DFS Furniture PLC and MAGNA INTL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MAGNA INTL 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 MAGNA INTL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MAGNA INTL has no effect on the direction of DFS Furniture i.e., DFS Furniture and MAGNA INTL go up and down completely randomly.
Pair Corralation between DFS Furniture and MAGNA INTL
Assuming the 90 days trading horizon DFS Furniture PLC is expected to generate 2.6 times more return on investment than MAGNA INTL. However, DFS Furniture is 2.6 times more volatile than MAGNA INTL. It trades about 0.01 of its potential returns per unit of risk. MAGNA INTL is currently generating about -0.09 per unit of risk. If you would invest 164.00 in DFS Furniture PLC on October 20, 2024 and sell it today you would lose (1.00) from holding DFS Furniture PLC or give up 0.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
DFS Furniture PLC vs. MAGNA INTL
Performance |
| Timeline |
| DFS Furniture PLC |
| MAGNA INTL |
DFS Furniture and MAGNA INTL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DFS Furniture and MAGNA INTL
The main advantage of trading using opposite DFS Furniture and MAGNA INTL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DFS Furniture position performs unexpectedly, MAGNA INTL 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 MAGNA INTL will offset losses from the drop in MAGNA INTL's long position.| DFS Furniture vs. Charter Communications | DFS Furniture vs. Perseus Mining Limited | DFS Furniture vs. WillScot Mobile Mini | DFS Furniture vs. MINCO SILVER |
| MAGNA INTL vs. MGIC INVESTMENT | MAGNA INTL vs. Virtus Investment Partners | MAGNA INTL vs. Mount Gibson Iron | MAGNA INTL vs. Xiwang Special Steel |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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