Correlation Between DFS Furniture and SMA Solar
Can any of the company-specific risk be diversified away by investing in both DFS Furniture and SMA Solar 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 SMA Solar 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 SMA Solar Technology, you can compare the effects of market volatilities on DFS Furniture and SMA Solar 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 SMA Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of DFS Furniture and SMA Solar.
Diversification Opportunities for DFS Furniture and SMA Solar
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between DFS and SMA is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding DFS Furniture PLC and SMA Solar Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMA Solar Technology 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 SMA Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMA Solar Technology has no effect on the direction of DFS Furniture i.e., DFS Furniture and SMA Solar go up and down completely randomly.
Pair Corralation between DFS Furniture and SMA Solar
Assuming the 90 days trading horizon DFS Furniture PLC is expected to generate 0.69 times more return on investment than SMA Solar. However, DFS Furniture PLC is 1.44 times less risky than SMA Solar. It trades about 0.01 of its potential returns per unit of risk. SMA Solar Technology is currently generating about -0.06 per unit of risk. If you would invest 165.00 in DFS Furniture PLC on September 24, 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 Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
DFS Furniture PLC vs. SMA Solar Technology
Performance |
| Timeline |
| DFS Furniture PLC |
| SMA Solar Technology |
DFS Furniture and SMA Solar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DFS Furniture and SMA Solar
The main advantage of trading using opposite DFS Furniture and SMA Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DFS Furniture position performs unexpectedly, SMA Solar 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 SMA Solar will offset losses from the drop in SMA Solar's long position.| DFS Furniture vs. Apple Inc | DFS Furniture vs. Apple Inc | DFS Furniture vs. Apple Inc | DFS Furniture vs. Apple Inc |
| SMA Solar vs. First Solar | SMA Solar vs. SolarEdge Technologies | SMA Solar vs. Xinyi Solar Holdings | SMA Solar vs. Sunrun Inc |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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