Correlation Between PENN NATL and DFS Furniture

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

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

Diversification Opportunities for PENN NATL and DFS Furniture

0.44

Correlation Coefficient

PENN NATL  DFS Furniture

Very weak diversification

The 3 months correlation between PENN and DFS is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding PENN NATL GAMING 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 PENN NATL 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 PENN NATL GAMING 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 PENN NATL i.e., PENN NATL and DFS Furniture go up and down completely randomly.

Pair Corralation between PENN NATL and DFS Furniture

Assuming the 90 days trading horizon PENN NATL is expected to generate 1.02 times less return on investment than DFS Furniture. In addition to that, PENN NATL is 1.53 times more volatile than DFS Furniture PLC. It trades about 0.15 of its total potential returns per unit of risk. DFS Furniture PLC is currently generating about 0.24 per unit of volatility. If you would invest  147.00  in DFS Furniture PLC on April 20, 2025 and sell it today you would earn a total of  51.00  from holding DFS Furniture PLC or generate 34.69% return on investment over 90 days.

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

PENN NATL GAMING  vs.  DFS Furniture PLC

PENN NATL GAMING

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PENN NATL GAMING are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, PENN NATL exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 18 (%) 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.

Pair Trading with PENN NATL and DFS Furniture

The main advantage of trading using opposite PENN NATL and DFS Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PENN NATL 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 PENN NATL GAMING 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.