Correlation Between Leons Furniture and Dream Office
Can any of the company-specific risk be diversified away by investing in both Leons Furniture and Dream Office 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 Leons Furniture and Dream Office into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leons Furniture Limited and Dream Office Real, you can compare the effects of market volatilities on Leons Furniture and Dream Office 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 Leons Furniture with a short position of Dream Office. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leons Furniture and Dream Office.
Diversification Opportunities for Leons Furniture and Dream Office
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Leons and Dream is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Leons Furniture Limited and Dream Office Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dream Office Real and Leons 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 Leons Furniture Limited are associated (or correlated) with Dream Office. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dream Office Real has no effect on the direction of Leons Furniture i.e., Leons Furniture and Dream Office go up and down completely randomly.
Pair Corralation between Leons Furniture and Dream Office
Assuming the 90 days trading horizon Leons Furniture Limited is expected to under-perform the Dream Office. But the stock apears to be less risky and, when comparing its historical volatility, Leons Furniture Limited is 1.15 times less risky than Dream Office. The stock trades about -0.13 of its potential returns per unit of risk. The Dream Office Real is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest 1,831 in Dream Office Real on October 24, 2024 and sell it today you would lose (56.00) from holding Dream Office Real or give up 3.06% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Leons Furniture Limited vs. Dream Office Real
Performance |
| Timeline |
| Leons Furniture |
| Dream Office Real |
Leons Furniture and Dream Office Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leons Furniture and Dream Office
The main advantage of trading using opposite Leons Furniture and Dream Office positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leons Furniture position performs unexpectedly, Dream Office 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 Dream Office will offset losses from the drop in Dream Office's long position.| Leons Furniture vs. High Liner Foods | Leons Furniture vs. Richelieu Hardware | Leons Furniture vs. North West | Leons Furniture vs. Toromont Industries |
| Dream Office vs. Artis Real Estate | Dream Office vs. Boardwalk Real Estate | Dream Office vs. Allied Properties Real | Dream Office vs. HR Real Estate |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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