Correlation Between DFS Furniture and Microsoft
Can any of the company-specific risk be diversified away by investing in both DFS Furniture and Microsoft 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 Microsoft 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 Microsoft, you can compare the effects of market volatilities on DFS Furniture and Microsoft 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 Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of DFS Furniture and Microsoft.
Diversification Opportunities for DFS Furniture and Microsoft
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between DFS and Microsoft is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding DFS Furniture PLC and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft 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 Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of DFS Furniture i.e., DFS Furniture and Microsoft go up and down completely randomly.
Pair Corralation between DFS Furniture and Microsoft
Assuming the 90 days trading horizon DFS Furniture PLC is expected to under-perform the Microsoft. In addition to that, DFS Furniture is 1.04 times more volatile than Microsoft. It trades about -0.13 of its total potential returns per unit of risk. Microsoft is currently generating about -0.06 per unit of volatility. If you would invest 41,490 in Microsoft on November 7, 2024 and sell it today you would lose (1,285) from holding Microsoft or give up 3.1% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
DFS Furniture PLC vs. Microsoft
Performance |
| Timeline |
| DFS Furniture PLC |
| Microsoft |
DFS Furniture and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DFS Furniture and Microsoft
The main advantage of trading using opposite DFS Furniture and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DFS Furniture position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.| DFS Furniture vs. Wayside Technology Group | DFS Furniture vs. Align Technology | DFS Furniture vs. PACIFIC ONLINE | DFS Furniture vs. GEAR4MUSIC LS 10 |
| Microsoft vs. Columbia Sportswear | Microsoft vs. Calibre Mining Corp | Microsoft vs. TITANIUM TRANSPORTGROUP | Microsoft vs. MAGNUM MINING EXP |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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