Correlation Between DFS Furniture and CNH Industrial
Can any of the company-specific risk be diversified away by investing in both DFS Furniture and CNH Industrial 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 CNH Industrial 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 CNH Industrial NV, you can compare the effects of market volatilities on DFS Furniture and CNH Industrial 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 CNH Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of DFS Furniture and CNH Industrial.
Diversification Opportunities for DFS Furniture and CNH Industrial
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between DFS and CNH is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding DFS Furniture PLC and CNH Industrial NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNH Industrial NV 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 CNH Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNH Industrial NV has no effect on the direction of DFS Furniture i.e., DFS Furniture and CNH Industrial go up and down completely randomly.
Pair Corralation between DFS Furniture and CNH Industrial
Assuming the 90 days trading horizon DFS Furniture PLC is expected to generate 1.36 times more return on investment than CNH Industrial. However, DFS Furniture is 1.36 times more volatile than CNH Industrial NV. It trades about 0.08 of its potential returns per unit of risk. CNH Industrial NV is currently generating about 0.01 per unit of risk. If you would invest 14,140 in DFS Furniture PLC on October 21, 2024 and sell it today you would earn a total of 360.00 from holding DFS Furniture PLC or generate 2.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
DFS Furniture PLC vs. CNH Industrial NV
Performance |
| Timeline |
| DFS Furniture PLC |
| CNH Industrial NV |
DFS Furniture and CNH Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DFS Furniture and CNH Industrial
The main advantage of trading using opposite DFS Furniture and CNH Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DFS Furniture position performs unexpectedly, CNH Industrial 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 CNH Industrial will offset losses from the drop in CNH Industrial's long position.| DFS Furniture vs. International Biotechnology Trust | DFS Furniture vs. Manulife Financial Corp | DFS Furniture vs. Dairy Farm International | DFS Furniture vs. Sydbank |
| CNH Industrial vs. Axway Software SA | CNH Industrial vs. Check Point Software | CNH Industrial vs. Take Two Interactive Software | CNH Industrial vs. Austevoll Seafood ASA |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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