Correlation Between DFS Furniture and Lowe Cos
Can any of the company-specific risk be diversified away by investing in both DFS Furniture and Lowe Cos 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 Lowe Cos 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 Lowe Cos, you can compare the effects of market volatilities on DFS Furniture and Lowe Cos 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 Lowe Cos. Check out your portfolio center. Please also check ongoing floating volatility patterns of DFS Furniture and Lowe Cos.
Diversification Opportunities for DFS Furniture and Lowe Cos
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between DFS and Lowe is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding DFS Furniture PLC and Lowe Cos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lowe Cos 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 Lowe Cos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lowe Cos has no effect on the direction of DFS Furniture i.e., DFS Furniture and Lowe Cos go up and down completely randomly.
Pair Corralation between DFS Furniture and Lowe Cos
Assuming the 90 days trading horizon DFS Furniture PLC is expected to generate 1.62 times more return on investment than Lowe Cos. However, DFS Furniture is 1.62 times more volatile than Lowe Cos. It trades about 0.24 of its potential returns per unit of risk. Lowe Cos is currently generating about -0.01 per unit of risk. If you would invest 12,900 in DFS Furniture PLC on September 13, 2024 and sell it today you would earn a total of 1,480 from holding DFS Furniture PLC or generate 11.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
DFS Furniture PLC vs. Lowe Cos
Performance |
| Timeline |
| DFS Furniture PLC |
| Lowe Cos |
DFS Furniture and Lowe Cos Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DFS Furniture and Lowe Cos
The main advantage of trading using opposite DFS Furniture and Lowe Cos positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DFS Furniture position performs unexpectedly, Lowe Cos 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 Lowe Cos will offset losses from the drop in Lowe Cos' long position.| DFS Furniture vs. Berkshire Hathaway | DFS Furniture vs. Hyundai Motor | DFS Furniture vs. Samsung Electronics Co | DFS Furniture vs. Samsung Electronics Co |
| Lowe Cos vs. Samsung Electronics Co | Lowe Cos vs. Samsung Electronics Co | Lowe Cos vs. Hyundai Motor | Lowe Cos vs. Reliance Industries Ltd |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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