Correlation Between Dana and Standard
Can any of the company-specific risk be diversified away by investing in both Dana and Standard 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 Standard into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dana Inc and Standard Motor Products, you can compare the effects of market volatilities on Dana and Standard 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 Standard. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dana and Standard.
Diversification Opportunities for Dana and Standard
Very good diversification
The 3 months correlation between Dana and Standard is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Dana Inc and Standard Motor Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Standard Motor Products 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 Standard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Standard Motor Products has no effect on the direction of Dana i.e., Dana and Standard go up and down completely randomly.
Pair Corralation between Dana and Standard
Considering the 90-day investment horizon Dana Inc is expected to under-perform the Standard. In addition to that, Dana is 1.15 times more volatile than Standard Motor Products. It trades about -0.04 of its total potential returns per unit of risk. Standard Motor Products is currently generating about 0.0 per unit of volatility. If you would invest 3,437 in Standard Motor Products on August 24, 2024 and sell it today you would lose (220.00) from holding Standard Motor Products or give up 6.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dana Inc vs. Standard Motor Products
Performance |
| Timeline |
| Dana Inc |
| Standard Motor Products |
Dana and Standard Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dana and Standard
The main advantage of trading using opposite Dana and Standard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dana position performs unexpectedly, Standard 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 Standard will offset losses from the drop in Standard's long position.The idea behind Dana Inc and Standard Motor Products 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.| Standard vs. Dorman Products | Standard vs. Motorcar Parts of | Standard vs. Douglas Dynamics | Standard 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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