Correlation Between Standard and Douglas Dynamics
Can any of the company-specific risk be diversified away by investing in both Standard and Douglas Dynamics 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 Standard and Douglas Dynamics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Standard Motor Products and Douglas Dynamics, you can compare the effects of market volatilities on Standard and Douglas Dynamics 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 Standard with a short position of Douglas Dynamics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Standard and Douglas Dynamics.
Diversification Opportunities for Standard and Douglas Dynamics
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Standard and Douglas is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Standard Motor Products and Douglas Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Douglas Dynamics and Standard 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 Standard Motor Products are associated (or correlated) with Douglas Dynamics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Douglas Dynamics has no effect on the direction of Standard i.e., Standard and Douglas Dynamics go up and down completely randomly.
Pair Corralation between Standard and Douglas Dynamics
Considering the 90-day investment horizon Standard is expected to generate 4.46 times less return on investment than Douglas Dynamics. But when comparing it to its historical volatility, Standard Motor Products is 1.22 times less risky than Douglas Dynamics. It trades about 0.03 of its potential returns per unit of risk. Douglas Dynamics is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 2,398 in Douglas Dynamics on October 20, 2024 and sell it today you would earn a total of 75.00 from holding Douglas Dynamics or generate 3.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Standard Motor Products vs. Douglas Dynamics
Performance |
| Timeline |
| Standard Motor Products |
| Douglas Dynamics |
Standard and Douglas Dynamics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Standard and Douglas Dynamics
The main advantage of trading using opposite Standard and Douglas Dynamics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Standard position performs unexpectedly, Douglas Dynamics 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 Douglas Dynamics will offset losses from the drop in Douglas Dynamics' long position.| Standard vs. Dorman Products | Standard vs. Motorcar Parts of | Standard vs. Douglas Dynamics | Standard vs. Stoneridge |
| Douglas Dynamics vs. Monro Muffler Brake | Douglas Dynamics vs. Motorcar Parts of | Douglas Dynamics vs. Standard Motor Products | Douglas Dynamics 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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