Correlation Between Dorman Products and Lear
Can any of the company-specific risk be diversified away by investing in both Dorman Products and Lear 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 Lear into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dorman Products and Lear Corporation, you can compare the effects of market volatilities on Dorman Products and Lear 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 Lear. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dorman Products and Lear.
Diversification Opportunities for Dorman Products and Lear
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Dorman and Lear is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Dorman Products and Lear Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lear 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 Lear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lear has no effect on the direction of Dorman Products i.e., Dorman Products and Lear go up and down completely randomly.
Pair Corralation between Dorman Products and Lear
Given the investment horizon of 90 days Dorman Products is expected to generate 1.2 times more return on investment than Lear. However, Dorman Products is 1.2 times more volatile than Lear Corporation. It trades about 0.13 of its potential returns per unit of risk. Lear Corporation is currently generating about -0.06 per unit of risk. If you would invest 7,379 in Dorman Products on August 27, 2024 and sell it today you would earn a total of 6,566 from holding Dorman Products or generate 88.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dorman Products vs. Lear Corp.
Performance |
| Timeline |
| Dorman Products |
| Lear |
Dorman Products and Lear Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dorman Products and Lear
The main advantage of trading using opposite Dorman Products and Lear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dorman Products position performs unexpectedly, Lear 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 Lear will offset losses from the drop in Lear's long position.| Dorman Products vs. Standard Motor Products | Dorman Products vs. Motorcar Parts of | Dorman Products vs. Douglas Dynamics | Dorman Products 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 Global Correlations module to find global opportunities by holding instruments from different markets.
Other Complementary Tools
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities |