Correlation Between Fortune Brands and DFS Furniture

Can any of the company-specific risk be diversified away by investing in both Fortune Brands 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 Fortune Brands and DFS Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fortune Brands Home and DFS Furniture PLC, you can compare the effects of market volatilities on Fortune Brands 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 Fortune Brands with a short position of DFS Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortune Brands and DFS Furniture.

Diversification Opportunities for Fortune Brands and DFS Furniture

-0.85

Correlation Coefficient

Fortune Brands  DFS Furniture

Pay attention - limited upside

The 3 months correlation between Fortune and DFS is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Fortune Brands Home 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 Fortune Brands 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 Fortune Brands Home 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 Fortune Brands i.e., Fortune Brands and DFS Furniture go up and down completely randomly.

Pair Corralation between Fortune Brands and DFS Furniture

Assuming the 90 days trading horizon Fortune Brands is expected to generate 18.15 times less return on investment than DFS Furniture. In addition to that, Fortune Brands is 1.79 times more volatile than DFS Furniture PLC. It trades about 0.01 of its total potential returns per unit of risk. DFS Furniture PLC is currently generating about 0.27 per unit of volatility. If you would invest  13,150  in DFS Furniture PLC on April 23, 2025 and sell it today you would earn a total of  4,350  from holding DFS Furniture PLC or generate 33.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	74.19%
Values	Daily Returns

Fortune Brands Home  vs.  DFS Furniture PLC

Fortune Brands Home

Risk-Adjusted Performance

Very Weak

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

DFS Furniture PLC

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in DFS Furniture PLC are ranked lower than 21 (%) 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.

Pair Trading with Fortune Brands and DFS Furniture

The main advantage of trading using opposite Fortune Brands and DFS Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortune Brands 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 Fortune Brands Home 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.

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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.