Correlation Between Software Circle and DFS Furniture
Can any of the company-specific risk be diversified away by investing in both Software Circle 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 Software Circle and DFS Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Software Circle plc and DFS Furniture PLC, you can compare the effects of market volatilities on Software Circle 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 Software Circle with a short position of DFS Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Software Circle and DFS Furniture.
Diversification Opportunities for Software Circle and DFS Furniture
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Software and DFS is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Software Circle plc 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 Software Circle 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 Software Circle plc 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 Software Circle i.e., Software Circle and DFS Furniture go up and down completely randomly.
Pair Corralation between Software Circle and DFS Furniture
Assuming the 90 days trading horizon Software Circle plc is expected to generate 0.96 times more return on investment than DFS Furniture. However, Software Circle plc is 1.04 times less risky than DFS Furniture. It trades about 0.11 of its potential returns per unit of risk. DFS Furniture PLC is currently generating about 0.0 per unit of risk. If you would invest 875.00 in Software Circle plc on November 6, 2024 and sell it today you would earn a total of 1,575 from holding Software Circle plc or generate 180.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Software Circle plc vs. DFS Furniture PLC
Performance |
| Timeline |
| Software Circle plc |
| DFS Furniture PLC |
Software Circle and DFS Furniture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Software Circle and DFS Furniture
The main advantage of trading using opposite Software Circle and DFS Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Software Circle 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.| Software Circle vs. Bytes Technology | Software Circle vs. Xeros Technology Group | Software Circle vs. Travel Leisure Co | Software Circle vs. Ecclesiastical Insurance Office |
| DFS Furniture vs. FC Investment Trust | DFS Furniture vs. Vietnam Enterprise Investments | DFS Furniture vs. Kinnevik Investment AB | DFS Furniture vs. OneSavings Bank PLC |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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