Correlation Between DFS Furniture and Cadence Design
Can any of the company-specific risk be diversified away by investing in both DFS Furniture and Cadence Design 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 Cadence Design 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 Cadence Design Systems, you can compare the effects of market volatilities on DFS Furniture and Cadence Design 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 Cadence Design. Check out your portfolio center. Please also check ongoing floating volatility patterns of DFS Furniture and Cadence Design.
Diversification Opportunities for DFS Furniture and Cadence Design
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between DFS and Cadence is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding DFS Furniture PLC and Cadence Design Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cadence Design Systems 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 Cadence Design. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cadence Design Systems has no effect on the direction of DFS Furniture i.e., DFS Furniture and Cadence Design go up and down completely randomly.
Pair Corralation between DFS Furniture and Cadence Design
Assuming the 90 days trading horizon DFS Furniture PLC is expected to generate 0.78 times more return on investment than Cadence Design. However, DFS Furniture PLC is 1.28 times less risky than Cadence Design. It trades about 0.15 of its potential returns per unit of risk. Cadence Design Systems is currently generating about 0.09 per unit of risk. If you would invest 11,960 in DFS Furniture PLC on September 12, 2024 and sell it today you would earn a total of 2,420 from holding DFS Furniture PLC or generate 20.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.46% |
| Values | Daily Returns |
DFS Furniture PLC vs. Cadence Design Systems
Performance |
| Timeline |
| DFS Furniture PLC |
| Cadence Design Systems |
DFS Furniture and Cadence Design Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DFS Furniture and Cadence Design
The main advantage of trading using opposite DFS Furniture and Cadence Design positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DFS Furniture position performs unexpectedly, Cadence Design 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 Cadence Design will offset losses from the drop in Cadence Design's long position.| DFS Furniture vs. Berkshire Hathaway | DFS Furniture vs. Hyundai Motor | DFS Furniture vs. Samsung Electronics Co | DFS Furniture vs. Samsung Electronics Co |
| Cadence Design vs. Air Products Chemicals | Cadence Design vs. Creo Medical Group | Cadence Design vs. DFS Furniture PLC | Cadence Design vs. Finnair Oyj |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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