Correlation Between News and DFS Furniture
Can any of the company-specific risk be diversified away by investing in both News 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 News and DFS Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between News Corporation and DFS Furniture PLC, you can compare the effects of market volatilities on News 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 News with a short position of DFS Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of News and DFS Furniture.
Diversification Opportunities for News and DFS Furniture
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between News and DFS is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding News Corp. 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 News 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 News Corporation 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 News i.e., News and DFS Furniture go up and down completely randomly.
Pair Corralation between News and DFS Furniture
Assuming the 90 days horizon News Corporation is expected to generate 0.77 times more return on investment than DFS Furniture. However, News Corporation is 1.31 times less risky than DFS Furniture. It trades about 0.36 of its potential returns per unit of risk. DFS Furniture PLC is currently generating about 0.01 per unit of risk. If you would invest 2,440 in News Corporation on August 29, 2024 and sell it today you would earn a total of 340.00 from holding News Corporation or generate 13.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
News Corp. vs. DFS Furniture PLC
Performance |
| Timeline |
| News |
| DFS Furniture PLC |
News and DFS Furniture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with News and DFS Furniture
The main advantage of trading using opposite News and DFS Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if News 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.The idea behind News Corporation and DFS Furniture PLC pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| DFS Furniture vs. Apple Inc | DFS Furniture vs. Apple Inc | DFS Furniture vs. Apple Inc | DFS Furniture vs. Apple Inc |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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