Correlation Between DFS Furniture and Urban Outfitters
Can any of the company-specific risk be diversified away by investing in both DFS Furniture and Urban Outfitters 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 Urban Outfitters 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 Urban Outfitters, you can compare the effects of market volatilities on DFS Furniture and Urban Outfitters 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 Urban Outfitters. Check out your portfolio center. Please also check ongoing floating volatility patterns of DFS Furniture and Urban Outfitters.
Diversification Opportunities for DFS Furniture and Urban Outfitters
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between DFS and Urban is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding DFS Furniture PLC and Urban Outfitters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Urban Outfitters 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 Urban Outfitters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Urban Outfitters has no effect on the direction of DFS Furniture i.e., DFS Furniture and Urban Outfitters go up and down completely randomly.
Pair Corralation between DFS Furniture and Urban Outfitters
Assuming the 90 days trading horizon DFS Furniture PLC is expected to under-perform the Urban Outfitters. But the stock apears to be less risky and, when comparing its historical volatility, DFS Furniture PLC is 1.02 times less risky than Urban Outfitters. The stock trades about -0.26 of its potential returns per unit of risk. The Urban Outfitters is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 5,300 in Urban Outfitters on October 30, 2024 and sell it today you would earn a total of 300.00 from holding Urban Outfitters or generate 5.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
DFS Furniture PLC vs. Urban Outfitters
Performance |
| Timeline |
| DFS Furniture PLC |
| Urban Outfitters |
DFS Furniture and Urban Outfitters Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DFS Furniture and Urban Outfitters
The main advantage of trading using opposite DFS Furniture and Urban Outfitters positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DFS Furniture position performs unexpectedly, Urban Outfitters 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 Urban Outfitters will offset losses from the drop in Urban Outfitters' long position.| DFS Furniture vs. Apple Inc | DFS Furniture vs. Apple Inc | DFS Furniture vs. Apple Inc | DFS Furniture vs. Apple Inc |
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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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