Correlation Between DFS Furniture and CleanTech Lithium
Can any of the company-specific risk be diversified away by investing in both DFS Furniture and CleanTech Lithium 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 CleanTech Lithium 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 CleanTech Lithium plc, you can compare the effects of market volatilities on DFS Furniture and CleanTech Lithium 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 CleanTech Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of DFS Furniture and CleanTech Lithium.
Diversification Opportunities for DFS Furniture and CleanTech Lithium
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between DFS and CleanTech is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding DFS Furniture PLC and CleanTech Lithium plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CleanTech Lithium 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 CleanTech Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CleanTech Lithium plc has no effect on the direction of DFS Furniture i.e., DFS Furniture and CleanTech Lithium go up and down completely randomly.
Pair Corralation between DFS Furniture and CleanTech Lithium
Assuming the 90 days trading horizon DFS Furniture PLC is expected to under-perform the CleanTech Lithium. But the stock apears to be less risky and, when comparing its historical volatility, DFS Furniture PLC is 1.81 times less risky than CleanTech Lithium. The stock trades about -0.08 of its potential returns per unit of risk. The CleanTech Lithium plc is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,725 in CleanTech Lithium plc on November 7, 2024 and sell it today you would earn a total of 25.00 from holding CleanTech Lithium plc or generate 1.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
DFS Furniture PLC vs. CleanTech Lithium plc
Performance |
| Timeline |
| DFS Furniture PLC |
| CleanTech Lithium plc |
DFS Furniture and CleanTech Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DFS Furniture and CleanTech Lithium
The main advantage of trading using opposite DFS Furniture and CleanTech Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DFS Furniture position performs unexpectedly, CleanTech Lithium 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 CleanTech Lithium will offset losses from the drop in CleanTech Lithium's long position.| DFS Furniture vs. Erste Group Bank | DFS Furniture vs. Cars Inc | DFS Furniture vs. Bankers Investment Trust | DFS Furniture vs. Litigation Capital Management |
| CleanTech Lithium vs. Gaztransport et Technigaz | CleanTech Lithium vs. SBM Offshore NV | CleanTech Lithium vs. Hochschild Mining plc | CleanTech Lithium vs. Eastinco Mining Exploration |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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