Correlation Between DFS Furniture and Pentair PLC
Can any of the company-specific risk be diversified away by investing in both DFS Furniture and Pentair PLC 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 Pentair PLC 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 Pentair PLC, you can compare the effects of market volatilities on DFS Furniture and Pentair PLC 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 Pentair PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of DFS Furniture and Pentair PLC.
Diversification Opportunities for DFS Furniture and Pentair PLC
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between DFS and Pentair is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding DFS Furniture PLC and Pentair PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair PLC 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 Pentair PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pentair PLC has no effect on the direction of DFS Furniture i.e., DFS Furniture and Pentair PLC go up and down completely randomly.
Pair Corralation between DFS Furniture and Pentair PLC
Assuming the 90 days trading horizon DFS Furniture PLC is expected to generate 1.61 times more return on investment than Pentair PLC. However, DFS Furniture is 1.61 times more volatile than Pentair PLC. It trades about 0.05 of its potential returns per unit of risk. Pentair PLC is currently generating about -0.32 per unit of risk. If you would invest 13,900 in DFS Furniture PLC on September 24, 2024 and sell it today you would earn a total of 240.00 from holding DFS Furniture PLC or generate 1.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
DFS Furniture PLC vs. Pentair PLC
Performance |
| Timeline |
| DFS Furniture PLC |
| Pentair PLC |
DFS Furniture and Pentair PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DFS Furniture and Pentair PLC
The main advantage of trading using opposite DFS Furniture and Pentair PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DFS Furniture position performs unexpectedly, Pentair PLC 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 Pentair PLC will offset losses from the drop in Pentair PLC's long position.| DFS Furniture vs. Broadridge Financial Solutions | DFS Furniture vs. JB Hunt Transport | DFS Furniture vs. Bankers Investment Trust | DFS Furniture vs. Roadside Real Estate |
| Pentair PLC vs. Young Cos Brewery | Pentair PLC vs. Fortune Brands Home | Pentair PLC vs. DFS Furniture PLC | Pentair PLC vs. American Homes 4 |
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 Stocks Directory module to find actively traded stocks across global markets.
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