Correlation Between DFS Furniture and Schweiter Technologies

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

Diversification Opportunities for DFS Furniture and Schweiter Technologies

-0.18

Correlation Coefficient

DFS Furniture  Schweiter Technologies

Good diversification

The 3 months correlation between DFS and Schweiter is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding DFS Furniture PLC and Schweiter Technologies AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schweiter Technologies 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 Schweiter Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schweiter Technologies has no effect on the direction of DFS Furniture i.e., DFS Furniture and Schweiter Technologies go up and down completely randomly.

Pair Corralation between DFS Furniture and Schweiter Technologies

Assuming the 90 days trading horizon DFS Furniture PLC is expected to generate 0.95 times more return on investment than Schweiter Technologies. However, DFS Furniture PLC is 1.05 times less risky than Schweiter Technologies. It trades about 0.17 of its potential returns per unit of risk. Schweiter Technologies AG is currently generating about -0.04 per unit of risk. If you would invest  11,500  in DFS Furniture PLC on September 24, 2024 and sell it today you would earn a total of  2,640  from holding DFS Furniture PLC or generate 22.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

DFS Furniture PLC  vs.  Schweiter Technologies AG

DFS Furniture PLC

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DFS Furniture PLC are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, DFS Furniture exhibited solid returns over the last few months and may actually be approaching a breakup point.

Schweiter Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Schweiter Technologies AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Schweiter Technologies is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with DFS Furniture and Schweiter Technologies

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

The idea behind DFS Furniture PLC and Schweiter Technologies AG 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.

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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.