Correlation Between DFS Furniture and Sterling Construction
Can any of the company-specific risk be diversified away by investing in both DFS Furniture and Sterling Construction 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 Sterling Construction 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 Sterling Construction, you can compare the effects of market volatilities on DFS Furniture and Sterling Construction 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 Sterling Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of DFS Furniture and Sterling Construction.
Diversification Opportunities for DFS Furniture and Sterling Construction
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between DFS and Sterling is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding DFS Furniture PLC and Sterling Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Construction 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 Sterling Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Construction has no effect on the direction of DFS Furniture i.e., DFS Furniture and Sterling Construction go up and down completely randomly.
Pair Corralation between DFS Furniture and Sterling Construction
Assuming the 90 days trading horizon DFS Furniture PLC is expected to generate 0.49 times more return on investment than Sterling Construction. However, DFS Furniture PLC is 2.04 times less risky than Sterling Construction. It trades about -0.01 of its potential returns per unit of risk. Sterling Construction is currently generating about -0.02 per unit of risk. If you would invest 159.00 in DFS Furniture PLC on November 6, 2024 and sell it today you would lose (5.00) from holding DFS Furniture PLC or give up 3.14% 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. Sterling Construction
Performance |
| Timeline |
| DFS Furniture PLC |
| Sterling Construction |
DFS Furniture and Sterling Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DFS Furniture and Sterling Construction
The main advantage of trading using opposite DFS Furniture and Sterling Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DFS Furniture position performs unexpectedly, Sterling Construction 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 Sterling Construction will offset losses from the drop in Sterling Construction's long position.| DFS Furniture vs. KENEDIX OFFICE INV | DFS Furniture vs. Cal Maine Foods | DFS Furniture vs. Moneysupermarket Group PLC | DFS Furniture vs. CAL MAINE FOODS |
| Sterling Construction vs. EMBARK EDUCATION LTD | Sterling Construction vs. Transport International Holdings | Sterling Construction vs. JD SPORTS FASH | Sterling Construction vs. Perdoceo Education |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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