Correlation Between Litigation Capital and DFS Furniture
Can any of the company-specific risk be diversified away by investing in both Litigation Capital and DFS Furniture 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 Litigation Capital and DFS Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Litigation Capital Management and DFS Furniture PLC, you can compare the effects of market volatilities on Litigation Capital and DFS Furniture 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 Litigation Capital with a short position of DFS Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Litigation Capital and DFS Furniture.
Diversification Opportunities for Litigation Capital and DFS Furniture
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Litigation and DFS is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Litigation Capital Management and DFS Furniture PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DFS Furniture PLC and Litigation Capital 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 Litigation Capital Management are associated (or correlated) with DFS Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DFS Furniture PLC has no effect on the direction of Litigation Capital i.e., Litigation Capital and DFS Furniture go up and down completely randomly.
Pair Corralation between Litigation Capital and DFS Furniture
Assuming the 90 days trading horizon Litigation Capital Management is expected to generate 1.1 times more return on investment than DFS Furniture. However, Litigation Capital is 1.1 times more volatile than DFS Furniture PLC. It trades about 0.06 of its potential returns per unit of risk. DFS Furniture PLC is currently generating about 0.02 per unit of risk. If you would invest 7,252 in Litigation Capital Management on August 26, 2024 and sell it today you would earn a total of 4,323 from holding Litigation Capital Management or generate 59.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Litigation Capital Management vs. DFS Furniture PLC
Performance |
| Timeline |
| Litigation Capital |
| DFS Furniture PLC |
Litigation Capital and DFS Furniture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Litigation Capital and DFS Furniture
The main advantage of trading using opposite Litigation Capital and DFS Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Litigation Capital position performs unexpectedly, DFS Furniture 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 DFS Furniture will offset losses from the drop in DFS Furniture's long position.| Litigation Capital vs. Catalyst Media Group | Litigation Capital vs. Oncimmune Holdings plc | Litigation Capital vs. Invesco Health Care | Litigation Capital vs. Coor Service Management |
| DFS Furniture vs. Rockfire Resources plc | DFS Furniture vs. Tlou Energy | DFS Furniture vs. Ikigai Ventures | DFS Furniture vs. Falcon Oil Gas |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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