Correlation Between Dover and Otis Worldwide
Can any of the company-specific risk be diversified away by investing in both Dover and Otis Worldwide 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 Dover and Otis Worldwide into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dover and Otis Worldwide Corp, you can compare the effects of market volatilities on Dover and Otis Worldwide 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 Dover with a short position of Otis Worldwide. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dover and Otis Worldwide.
Diversification Opportunities for Dover and Otis Worldwide
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dover and Otis is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Dover and Otis Worldwide Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Otis Worldwide Corp and Dover 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 Dover are associated (or correlated) with Otis Worldwide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Otis Worldwide Corp has no effect on the direction of Dover i.e., Dover and Otis Worldwide go up and down completely randomly.
Pair Corralation between Dover and Otis Worldwide
Considering the 90-day investment horizon Dover is expected to generate 1.15 times more return on investment than Otis Worldwide. However, Dover is 1.15 times more volatile than Otis Worldwide Corp. It trades about 0.08 of its potential returns per unit of risk. Otis Worldwide Corp is currently generating about 0.05 per unit of risk. If you would invest 13,986 in Dover on August 31, 2024 and sell it today you would earn a total of 6,665 from holding Dover or generate 47.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dover vs. Otis Worldwide Corp
Performance |
| Timeline |
| Dover |
| Otis Worldwide Corp |
Dover and Otis Worldwide Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dover and Otis Worldwide
The main advantage of trading using opposite Dover and Otis Worldwide positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dover position performs unexpectedly, Otis Worldwide 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 Otis Worldwide will offset losses from the drop in Otis Worldwide's long position.The idea behind Dover and Otis Worldwide Corp 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.| Otis Worldwide vs. Parker Hannifin | Otis Worldwide vs. Eaton PLC | Otis Worldwide vs. Dover | Otis Worldwide vs. Illinois Tool Works |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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