Correlation Between DFS Furniture and Hercules Capital

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

Diversification Opportunities for DFS Furniture and Hercules Capital

0.53

Correlation Coefficient

DFS Furniture  Hercules Capital

Very weak diversification

The 3 months correlation between DFS and Hercules is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding DFS Furniture PLC and Hercules Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hercules Capital 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 Hercules Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hercules Capital has no effect on the direction of DFS Furniture i.e., DFS Furniture and Hercules Capital go up and down completely randomly.

Pair Corralation between DFS Furniture and Hercules Capital

Assuming the 90 days trading horizon DFS Furniture PLC is expected to generate 1.26 times more return on investment than Hercules Capital. However, DFS Furniture is 1.26 times more volatile than Hercules Capital. It trades about 0.22 of its potential returns per unit of risk. Hercules Capital is currently generating about 0.09 per unit of risk. If you would invest  150.00  in DFS Furniture PLC on April 24, 2025 and sell it today you would earn a total of  47.00  from holding DFS Furniture PLC or generate 31.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

DFS Furniture PLC  vs.  Hercules Capital

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 17 (%) 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.

Hercules Capital

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hercules Capital are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hercules Capital may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with DFS Furniture and Hercules Capital

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

The idea behind DFS Furniture PLC and Hercules Capital 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.