Correlation Between Doman Building and Primaris Retail

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

By analyzing existing cross correlation between Doman Building Materials and Primaris Retail RE, you can compare the effects of market volatilities on Doman Building and Primaris Retail 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 Doman Building with a short position of Primaris Retail. Check out your portfolio center. Please also check ongoing floating volatility patterns of Doman Building and Primaris Retail.

Diversification Opportunities for Doman Building and Primaris Retail

0.73

Correlation Coefficient

Doman Building  Primaris Retail

Poor diversification

The 3 months correlation between Doman and Primaris is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Doman Building Materials and Primaris Retail RE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Primaris Retail RE and Doman Building 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 Doman Building Materials are associated (or correlated) with Primaris Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Primaris Retail RE has no effect on the direction of Doman Building i.e., Doman Building and Primaris Retail go up and down completely randomly.

Pair Corralation between Doman Building and Primaris Retail

Assuming the 90 days trading horizon Doman Building Materials is expected to generate 2.0 times more return on investment than Primaris Retail. However, Doman Building is 2.0 times more volatile than Primaris Retail RE. It trades about -0.14 of its potential returns per unit of risk. Primaris Retail RE is currently generating about -0.45 per unit of risk. If you would invest  865.00  in Doman Building Materials on October 21, 2024 and sell it today you would lose (46.00) from holding Doman Building Materials or give up 5.32% of portfolio value over 90 days.

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

Doman Building Materials  vs.  Primaris Retail RE

Doman Building Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Doman Building Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Doman Building is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Primaris Retail RE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Primaris Retail RE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Doman Building and Primaris Retail

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

The idea behind Doman Building Materials and Primaris Retail RE 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.