Correlation Between Velan and Dorel Industries
Can any of the company-specific risk be diversified away by investing in both Velan 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 Velan and Dorel Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Velan Inc and Dorel Industries, you can compare the effects of market volatilities on Velan 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 Velan with a short position of Dorel Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Velan and Dorel Industries.
Diversification Opportunities for Velan and Dorel Industries
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Velan and Dorel is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Velan Inc and Dorel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dorel Industries and Velan 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 Velan 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 Velan i.e., Velan and Dorel Industries go up and down completely randomly.
Pair Corralation between Velan and Dorel Industries
Assuming the 90 days trading horizon Velan Inc is expected to generate 0.83 times more return on investment than Dorel Industries. However, Velan Inc is 1.21 times less risky than Dorel Industries. It trades about 0.08 of its potential returns per unit of risk. Dorel Industries is currently generating about -0.39 per unit of risk. If you would invest 1,101 in Velan Inc on August 27, 2024 and sell it today you would earn a total of 42.00 from holding Velan Inc or generate 3.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Velan Inc vs. Dorel Industries
Performance |
| Timeline |
| Velan Inc |
| Dorel Industries |
Velan and Dorel Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Velan and Dorel Industries
The main advantage of trading using opposite Velan and Dorel Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Velan 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 Velan 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.| Dorel Industries vs. Stella Jones | Dorel Industries vs. Winpak | Dorel Industries vs. Stantec | Dorel Industries vs. Gildan Activewear |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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