Correlation Between Dana and Motorcar Parts
Can any of the company-specific risk be diversified away by investing in both Dana and Motorcar Parts 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 Dana and Motorcar Parts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dana Inc and Motorcar Parts of, you can compare the effects of market volatilities on Dana and Motorcar Parts 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 Dana with a short position of Motorcar Parts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dana and Motorcar Parts.
Diversification Opportunities for Dana and Motorcar Parts
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Dana and Motorcar is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Dana Inc and Motorcar Parts of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Motorcar Parts and Dana 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 Dana Inc are associated (or correlated) with Motorcar Parts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Motorcar Parts has no effect on the direction of Dana i.e., Dana and Motorcar Parts go up and down completely randomly.
Pair Corralation between Dana and Motorcar Parts
Considering the 90-day investment horizon Dana Inc is expected to under-perform the Motorcar Parts. But the stock apears to be less risky and, when comparing its historical volatility, Dana Inc is 1.16 times less risky than Motorcar Parts. The stock trades about -0.1 of its potential returns per unit of risk. The Motorcar Parts of is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 675.00 in Motorcar Parts of on August 23, 2024 and sell it today you would earn a total of 20.00 from holding Motorcar Parts of or generate 2.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dana Inc vs. Motorcar Parts of
Performance |
| Timeline |
| Dana Inc |
| Motorcar Parts |
Dana and Motorcar Parts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dana and Motorcar Parts
The main advantage of trading using opposite Dana and Motorcar Parts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dana position performs unexpectedly, Motorcar Parts 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 Motorcar Parts will offset losses from the drop in Motorcar Parts' long position.The idea behind Dana Inc and Motorcar Parts of 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.| Motorcar Parts vs. Monro Muffler Brake | Motorcar Parts vs. Standard Motor Products | Motorcar Parts vs. Stoneridge | Motorcar Parts vs. Douglas Dynamics |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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