Correlation Between Douglas Dynamics and Stoneridge
Can any of the company-specific risk be diversified away by investing in both Douglas Dynamics and Stoneridge 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 Douglas Dynamics and Stoneridge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Douglas Dynamics and Stoneridge, you can compare the effects of market volatilities on Douglas Dynamics and Stoneridge 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 Douglas Dynamics with a short position of Stoneridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Douglas Dynamics and Stoneridge.
Diversification Opportunities for Douglas Dynamics and Stoneridge
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Douglas and Stoneridge is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Douglas Dynamics and Stoneridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stoneridge and Douglas Dynamics 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 Douglas Dynamics are associated (or correlated) with Stoneridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stoneridge has no effect on the direction of Douglas Dynamics i.e., Douglas Dynamics and Stoneridge go up and down completely randomly.
Pair Corralation between Douglas Dynamics and Stoneridge
Given the investment horizon of 90 days Douglas Dynamics is expected to generate 0.74 times more return on investment than Stoneridge. However, Douglas Dynamics is 1.35 times less risky than Stoneridge. It trades about -0.02 of its potential returns per unit of risk. Stoneridge is currently generating about -0.08 per unit of risk. If you would invest 3,600 in Douglas Dynamics on August 23, 2024 and sell it today you would lose (1,123) from holding Douglas Dynamics or give up 31.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Douglas Dynamics vs. Stoneridge
Performance |
| Timeline |
| Douglas Dynamics |
| Stoneridge |
Douglas Dynamics and Stoneridge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Douglas Dynamics and Stoneridge
The main advantage of trading using opposite Douglas Dynamics and Stoneridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Douglas Dynamics position performs unexpectedly, Stoneridge 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 Stoneridge will offset losses from the drop in Stoneridge's long position.| Douglas Dynamics vs. Monro Muffler Brake | Douglas Dynamics vs. Motorcar Parts of | Douglas Dynamics vs. Standard Motor Products | Douglas Dynamics vs. Stoneridge |
| Stoneridge vs. Monro Muffler Brake | Stoneridge vs. Motorcar Parts of | Stoneridge vs. Standard Motor Products | Stoneridge vs. Douglas Dynamics |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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