Correlation Between Dana and Douglas Dynamics

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

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

Diversification Opportunities for Dana and Douglas Dynamics

0.76

Correlation Coefficient

Dana  Douglas Dynamics

Poor diversification

The 3 months correlation between Dana and Douglas is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Dana Inc and Douglas Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Douglas Dynamics and Dana 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 Dana Inc 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 Dana i.e., Dana and Douglas Dynamics go up and down completely randomly.

Pair Corralation between Dana and Douglas Dynamics

Considering the 90-day investment horizon Dana Inc is expected to generate 1.99 times more return on investment than Douglas Dynamics. However, Dana is 1.99 times more volatile than Douglas Dynamics. It trades about 0.11 of its potential returns per unit of risk. Douglas Dynamics is currently generating about 0.04 per unit of risk. If you would invest  1,139  in Dana Inc on December 28, 2024 and sell it today you would earn a total of  236.00  from holding Dana Inc or generate 20.72% return on investment over 90 days.

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

Dana Inc  vs.  Douglas Dynamics

Dana Inc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dana Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Dana displayed solid returns over the last few months and may actually be approaching a breakup point.

Douglas Dynamics

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Douglas Dynamics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Douglas Dynamics is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Dana and Douglas Dynamics

The main advantage of trading using opposite Dana and Douglas Dynamics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dana 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.

The idea behind Dana Inc and Douglas Dynamics 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..