Correlation Between DFS Furniture and Autohome ADR

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

Diversification Opportunities for DFS Furniture and Autohome ADR

0.14

Correlation Coefficient

DFS Furniture  Autohome ADR

Average diversification

The 3 months correlation between DFS and Autohome is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding DFS Furniture PLC and Autohome ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autohome ADR 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 Autohome ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Autohome ADR has no effect on the direction of DFS Furniture i.e., DFS Furniture and Autohome ADR go up and down completely randomly.

Pair Corralation between DFS Furniture and Autohome ADR

Assuming the 90 days trading horizon DFS Furniture PLC is expected to generate 0.77 times more return on investment than Autohome ADR. However, DFS Furniture PLC is 1.31 times less risky than Autohome ADR. It trades about 0.24 of its potential returns per unit of risk. Autohome ADR is currently generating about 0.13 per unit of risk. If you would invest  153.00  in DFS Furniture PLC on September 16, 2024 and sell it today you would earn a total of  13.00  from holding DFS Furniture PLC or generate 8.5% return on investment over 90 days.

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

DFS Furniture PLC  vs.  Autohome ADR

DFS Furniture PLC

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DFS Furniture PLC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, DFS Furniture unveiled solid returns over the last few months and may actually be approaching a breakup point.

Autohome ADR

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Autohome ADR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, Autohome ADR may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with DFS Furniture and Autohome ADR

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

The idea behind DFS Furniture PLC and Autohome ADR 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.