Correlation Between Adient PLC and Douglas Dynamics
Can any of the company-specific risk be diversified away by investing in both Adient PLC and Douglas Dynamics 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 Adient PLC and Douglas Dynamics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Adient PLC and Douglas Dynamics, you can compare the effects of market volatilities on Adient PLC and Douglas Dynamics 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 Adient PLC with a short position of Douglas Dynamics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adient PLC and Douglas Dynamics.
Diversification Opportunities for Adient PLC and Douglas Dynamics
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Adient and Douglas is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Adient PLC and Douglas Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Douglas Dynamics and Adient PLC 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 Adient PLC are associated (or correlated) with Douglas Dynamics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Douglas Dynamics has no effect on the direction of Adient PLC i.e., Adient PLC and Douglas Dynamics go up and down completely randomly.
Pair Corralation between Adient PLC and Douglas Dynamics
Given the investment horizon of 90 days Adient PLC is expected to under-perform the Douglas Dynamics. But the stock apears to be less risky and, when comparing its historical volatility, Adient PLC is 1.02 times less risky than Douglas Dynamics. The stock trades about -0.08 of its potential returns per unit of risk. The Douglas Dynamics is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 2,609 in Douglas Dynamics on August 26, 2024 and sell it today you would lose (79.00) from holding Douglas Dynamics or give up 3.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Adient PLC vs. Douglas Dynamics
Performance |
| Timeline |
| Adient PLC |
| Douglas Dynamics |
Adient PLC and Douglas Dynamics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Adient PLC and Douglas Dynamics
The main advantage of trading using opposite Adient PLC and Douglas Dynamics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adient PLC position performs unexpectedly, Douglas Dynamics 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 Douglas Dynamics will offset losses from the drop in Douglas Dynamics' long position.| Adient PLC vs. Gentex | Adient PLC vs. Autoliv | Adient PLC vs. Fox Factory Holding | Adient PLC vs. Dana Inc |
| Douglas Dynamics vs. Monro Muffler Brake | Douglas Dynamics vs. Motorcar Parts of | Douglas Dynamics vs. Standard Motor Products | Douglas Dynamics vs. Stoneridge |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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