Correlation Between Cadre Holdings and Ducommun Incorporated

Can any of the company-specific risk be diversified away by investing in both Cadre Holdings and Ducommun Incorporated 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 Cadre Holdings and Ducommun Incorporated into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cadre Holdings and Ducommun Incorporated, you can compare the effects of market volatilities on Cadre Holdings and Ducommun Incorporated 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 Cadre Holdings with a short position of Ducommun Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cadre Holdings and Ducommun Incorporated.

Diversification Opportunities for Cadre Holdings and Ducommun Incorporated

-0.2

Correlation Coefficient

Cadre Holdings  Ducommun Incorporated

Good diversification

The 3 months correlation between Cadre and Ducommun is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Cadre Holdings and Ducommun Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ducommun Incorporated and Cadre Holdings 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 Cadre Holdings are associated (or correlated) with Ducommun Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ducommun Incorporated has no effect on the direction of Cadre Holdings i.e., Cadre Holdings and Ducommun Incorporated go up and down completely randomly.

Pair Corralation between Cadre Holdings and Ducommun Incorporated

Given the investment horizon of 90 days Cadre Holdings is expected to generate 300.33 times less return on investment than Ducommun Incorporated. In addition to that, Cadre Holdings is 1.26 times more volatile than Ducommun Incorporated. It trades about 0.0 of its total potential returns per unit of risk. Ducommun Incorporated is currently generating about 0.05 per unit of volatility. If you would invest  6,315  in Ducommun Incorporated on September 3, 2024 and sell it today you would earn a total of  309.00  from holding Ducommun Incorporated or generate 4.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Cadre Holdings  vs.  Ducommun Incorporated

Cadre Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cadre Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Cadre Holdings is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Ducommun Incorporated

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ducommun Incorporated are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Ducommun Incorporated is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Cadre Holdings and Ducommun Incorporated

The main advantage of trading using opposite Cadre Holdings and Ducommun Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cadre Holdings position performs unexpectedly, Ducommun Incorporated 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 Ducommun Incorporated will offset losses from the drop in Ducommun Incorporated's long position.

The idea behind Cadre Holdings and Ducommun Incorporated 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.