Correlation Between Dorman Products and Superior Industries
Can any of the company-specific risk be diversified away by investing in both Dorman Products and Superior Industries 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 Superior Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dorman Products and Superior Industries International, you can compare the effects of market volatilities on Dorman Products and Superior Industries 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 Superior Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dorman Products and Superior Industries.
Diversification Opportunities for Dorman Products and Superior Industries
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Dorman and Superior is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Dorman Products and Superior Industries Internatio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Superior Industries 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 Superior Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Superior Industries has no effect on the direction of Dorman Products i.e., Dorman Products and Superior Industries go up and down completely randomly.
Pair Corralation between Dorman Products and Superior Industries
Given the investment horizon of 90 days Dorman Products is expected to generate 0.62 times more return on investment than Superior Industries. However, Dorman Products is 1.6 times less risky than Superior Industries. It trades about 0.06 of its potential returns per unit of risk. Superior Industries International is currently generating about -0.02 per unit of risk. If you would invest 8,637 in Dorman Products on August 27, 2024 and sell it today you would earn a total of 5,308 from holding Dorman Products or generate 61.46% 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. Superior Industries Internatio
Performance |
| Timeline |
| Dorman Products |
| Superior Industries |
Dorman Products and Superior Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dorman Products and Superior Industries
The main advantage of trading using opposite Dorman Products and Superior Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dorman Products position performs unexpectedly, Superior Industries 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 Superior Industries will offset losses from the drop in Superior Industries' long position.The idea behind Dorman Products and Superior Industries International 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.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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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