Correlation Between River and DFS Furniture

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

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

Diversification Opportunities for River and DFS Furniture

0.88

Correlation Coefficient

River  DFS Furniture

Very poor diversification

The 3 months correlation between River and DFS is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding River and Mercantile 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 River 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 River and Mercantile 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 River i.e., River and DFS Furniture go up and down completely randomly.

Pair Corralation between River and DFS Furniture

Assuming the 90 days trading horizon River is expected to generate 1.57 times less return on investment than DFS Furniture. But when comparing it to its historical volatility, River and Mercantile is 1.46 times less risky than DFS Furniture. It trades about 0.25 of its potential returns per unit of risk. DFS Furniture PLC is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  13,050  in DFS Furniture PLC on April 21, 2025 and sell it today you would earn a total of  4,450  from holding DFS Furniture PLC or generate 34.1% return on investment over 90 days.

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

River and Mercantile  vs.  DFS Furniture PLC

River and Mercantile

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in River and Mercantile are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, River unveiled 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 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady 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 River and DFS Furniture

The main advantage of trading using opposite River and DFS Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if River 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 River and Mercantile 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.