Correlation Between Dorel Industries and Transalta
Can any of the company-specific risk be diversified away by investing in both Dorel Industries and Transalta 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 Transalta into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dorel Industries and Transalta A Cum, you can compare the effects of market volatilities on Dorel Industries and Transalta 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 Transalta. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dorel Industries and Transalta.
Diversification Opportunities for Dorel Industries and Transalta
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Dorel and Transalta is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Dorel Industries and Transalta A Cum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transalta A Cum 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 Transalta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transalta A Cum has no effect on the direction of Dorel Industries i.e., Dorel Industries and Transalta go up and down completely randomly.
Pair Corralation between Dorel Industries and Transalta
Assuming the 90 days trading horizon Dorel Industries is expected to generate 9.08 times more return on investment than Transalta. However, Dorel Industries is 9.08 times more volatile than Transalta A Cum. It trades about 0.23 of its potential returns per unit of risk. Transalta A Cum is currently generating about 0.25 per unit of risk. If you would invest 405.00 in Dorel Industries on November 3, 2024 and sell it today you would earn a total of 114.00 from holding Dorel Industries or generate 28.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dorel Industries vs. Transalta A Cum
Performance |
| Timeline |
| Dorel Industries |
| Transalta A Cum |
Dorel Industries and Transalta Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dorel Industries and Transalta
The main advantage of trading using opposite Dorel Industries and Transalta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dorel Industries position performs unexpectedly, Transalta 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 Transalta will offset losses from the drop in Transalta's long position.| Dorel Industries vs. Transcontinental | Dorel Industries vs. Gildan Activewear | Dorel Industries vs. Cogeco Communications | Dorel Industries vs. High Liner Foods |
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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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