Correlation Between Dorman Products and Continental
Can any of the company-specific risk be diversified away by investing in both Dorman Products and Continental 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 Dorman Products and Continental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dorman Products and Caleres, you can compare the effects of market volatilities on Dorman Products and Continental 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 Dorman Products with a short position of Continental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dorman Products and Continental.
Diversification Opportunities for Dorman Products and Continental
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dorman and Continental is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Dorman Products and Caleres in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Continental and Dorman Products 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 Dorman Products are associated (or correlated) with Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Continental has no effect on the direction of Dorman Products i.e., Dorman Products and Continental go up and down completely randomly.
Pair Corralation between Dorman Products and Continental
Given the investment horizon of 90 days Dorman Products is expected to generate 1.2 times more return on investment than Continental. However, Dorman Products is 1.2 times more volatile than Caleres. It trades about 0.29 of its potential returns per unit of risk. Caleres is currently generating about 0.07 per unit of risk. If you would invest 11,575 in Dorman Products on August 31, 2024 and sell it today you would earn a total of 2,405 from holding Dorman Products or generate 20.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dorman Products vs. Caleres
Performance |
| Timeline |
| Dorman Products |
| Continental |
Dorman Products and Continental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dorman Products and Continental
The main advantage of trading using opposite Dorman Products and Continental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dorman Products position performs unexpectedly, Continental 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 Continental will offset losses from the drop in Continental's long position.| Dorman Products vs. Standard Motor Products | Dorman Products vs. Motorcar Parts of | Dorman Products vs. Douglas Dynamics | Dorman Products vs. Stoneridge |
| Continental vs. Vera Bradley | Continental vs. Wolverine World Wide | Continental vs. Rocky Brands | Continental vs. Steven Madden |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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