Correlation Between Snap and Dorel Industries

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Can any of the company-specific risk be diversified away by investing in both Snap and Dorel 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 Snap and Dorel Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and Dorel Industries, you can compare the effects of market volatilities on Snap and Dorel 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 Snap with a short position of Dorel Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and Dorel Industries.

Diversification Opportunities for Snap and Dorel Industries

0.58
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Snap and Dorel is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and Dorel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dorel Industries and Snap 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 Snap Inc are associated (or correlated) with Dorel Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dorel Industries has no effect on the direction of Snap i.e., Snap and Dorel Industries go up and down completely randomly.

Pair Corralation between Snap and Dorel Industries

If you would invest  886.00  in Snap Inc on August 31, 2024 and sell it today you would earn a total of  275.00  from holding Snap Inc or generate 31.04% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy1.59%
ValuesDaily Returns

Snap Inc  vs.  Dorel Industries

 Performance 
       Timeline  
Snap Inc 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Snap Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Snap reported solid returns over the last few months and may actually be approaching a breakup point.
Dorel Industries 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Dorel Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, Dorel Industries is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Snap and Dorel Industries Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Snap and Dorel Industries

The main advantage of trading using opposite Snap and Dorel Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap position performs unexpectedly, Dorel 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 Dorel Industries will offset losses from the drop in Dorel Industries' long position.
The idea behind Snap Inc and Dorel Industries 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.
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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.

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