Correlation Between Dorel Industries and Alimentation Couchen
Can any of the company-specific risk be diversified away by investing in both Dorel Industries and Alimentation Couchen 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 Dorel Industries and Alimentation Couchen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dorel Industries and Alimentation Couchen Tard, you can compare the effects of market volatilities on Dorel Industries and Alimentation Couchen 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 Dorel Industries with a short position of Alimentation Couchen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dorel Industries and Alimentation Couchen.
Diversification Opportunities for Dorel Industries and Alimentation Couchen
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dorel and Alimentation is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Dorel Industries and Alimentation Couchen Tard in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alimentation Couchen Tard and Dorel Industries 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 Dorel Industries are associated (or correlated) with Alimentation Couchen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alimentation Couchen Tard has no effect on the direction of Dorel Industries i.e., Dorel Industries and Alimentation Couchen go up and down completely randomly.
Pair Corralation between Dorel Industries and Alimentation Couchen
Assuming the 90 days trading horizon Dorel Industries is expected to under-perform the Alimentation Couchen. In addition to that, Dorel Industries is 2.05 times more volatile than Alimentation Couchen Tard. It trades about -0.35 of its total potential returns per unit of risk. Alimentation Couchen Tard is currently generating about 0.11 per unit of volatility. If you would invest 7,739 in Alimentation Couchen Tard on September 13, 2024 and sell it today you would earn a total of 310.00 from holding Alimentation Couchen Tard or generate 4.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dorel Industries vs. Alimentation Couchen Tard
Performance |
| Timeline |
| Dorel Industries |
| Alimentation Couchen Tard |
Dorel Industries and Alimentation Couchen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dorel Industries and Alimentation Couchen
The main advantage of trading using opposite Dorel Industries and Alimentation Couchen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dorel Industries position performs unexpectedly, Alimentation Couchen 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 Alimentation Couchen will offset losses from the drop in Alimentation Couchen's long position.| Dorel Industries vs. Transcontinental | Dorel Industries vs. Gildan Activewear | Dorel Industries vs. Cogeco Communications | Dorel Industries vs. High Liner Foods |
| Alimentation Couchen vs. Metro Inc | Alimentation Couchen vs. Dollarama | Alimentation Couchen vs. Nutrien | Alimentation Couchen vs. Canadian Pacific Railway |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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