Correlation Between DFS Furniture and Check Point

Can any of the company-specific risk be diversified away by investing in both DFS Furniture and Check Point 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 Check Point 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 Check Point Software, you can compare the effects of market volatilities on DFS Furniture and Check Point 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 Check Point. Check out your portfolio center. Please also check ongoing floating volatility patterns of DFS Furniture and Check Point.

Diversification Opportunities for DFS Furniture and Check Point

0.26

Correlation Coefficient

DFS Furniture  Check Point

Modest diversification

The 3 months correlation between DFS and Check is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding DFS Furniture PLC and Check Point Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Check Point Software 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 Check Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Check Point Software has no effect on the direction of DFS Furniture i.e., DFS Furniture and Check Point go up and down completely randomly.

Pair Corralation between DFS Furniture and Check Point

Assuming the 90 days trading horizon DFS Furniture PLC is expected to generate 0.74 times more return on investment than Check Point. However, DFS Furniture PLC is 1.35 times less risky than Check Point. It trades about 0.13 of its potential returns per unit of risk. Check Point Software is currently generating about 0.05 per unit of risk. If you would invest  142.00  in DFS Furniture PLC on September 28, 2024 and sell it today you would earn a total of  18.00  from holding DFS Furniture PLC or generate 12.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

DFS Furniture PLC  vs.  Check Point Software

DFS Furniture PLC

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DFS Furniture PLC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, DFS Furniture unveiled solid returns over the last few months and may actually be approaching a breakup point.

Check Point Software

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Check Point Software are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Check Point may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with DFS Furniture and Check Point

The main advantage of trading using opposite DFS Furniture and Check Point positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DFS Furniture position performs unexpectedly, Check Point 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 Check Point will offset losses from the drop in Check Point's long position.

The idea behind DFS Furniture PLC and Check Point Software 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.