Correlation Between DFS Furniture and Mercantile Investment
Can any of the company-specific risk be diversified away by investing in both DFS Furniture and Mercantile Investment 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 Mercantile Investment 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 The Mercantile Investment, you can compare the effects of market volatilities on DFS Furniture and Mercantile Investment 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 Mercantile Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of DFS Furniture and Mercantile Investment.
Diversification Opportunities for DFS Furniture and Mercantile Investment
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between DFS and Mercantile is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding DFS Furniture PLC and The Mercantile Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Mercantile Investment 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 Mercantile Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Mercantile Investment has no effect on the direction of DFS Furniture i.e., DFS Furniture and Mercantile Investment go up and down completely randomly.
Pair Corralation between DFS Furniture and Mercantile Investment
Assuming the 90 days trading horizon DFS Furniture is expected to generate 3.02 times less return on investment than Mercantile Investment. In addition to that, DFS Furniture is 1.78 times more volatile than The Mercantile Investment. It trades about 0.01 of its total potential returns per unit of risk. The Mercantile Investment is currently generating about 0.05 per unit of volatility. If you would invest 18,331 in The Mercantile Investment on August 30, 2024 and sell it today you would earn a total of 5,169 from holding The Mercantile Investment or generate 28.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
DFS Furniture PLC vs. The Mercantile Investment
Performance |
| Timeline |
| DFS Furniture PLC |
| The Mercantile Investment |
DFS Furniture and Mercantile Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DFS Furniture and Mercantile Investment
The main advantage of trading using opposite DFS Furniture and Mercantile Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DFS Furniture position performs unexpectedly, Mercantile Investment 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 Mercantile Investment will offset losses from the drop in Mercantile Investment's long position.| DFS Furniture vs. Ondine Biomedical | DFS Furniture vs. Europa Metals | DFS Furniture vs. Lendinvest PLC | DFS Furniture vs. Neometals |
| Mercantile Investment vs. LPKF Laser Electronics | Mercantile Investment vs. Gaming Realms plc | Mercantile Investment vs. Compal Electronics GDR | Mercantile Investment vs. Flow Traders NV |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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