Correlation Between Ducommun Incorporated and Cadre Holdings

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

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

Diversification Opportunities for Ducommun Incorporated and Cadre Holdings

0.73

Correlation Coefficient

Ducommun Incorporated  Cadre Holdings

Poor diversification

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

Pair Corralation between Ducommun Incorporated and Cadre Holdings

Considering the 90-day investment horizon Ducommun Incorporated is expected to generate 0.73 times more return on investment than Cadre Holdings. However, Ducommun Incorporated is 1.36 times less risky than Cadre Holdings. It trades about -0.03 of its potential returns per unit of risk. Cadre Holdings is currently generating about -0.06 per unit of risk. If you would invest  6,095  in Ducommun Incorporated on December 28, 2024 and sell it today you would lose (248.00) from holding Ducommun Incorporated or give up 4.07% of portfolio value over 90 days.

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

Ducommun Incorporated  vs.  Cadre Holdings

Ducommun Incorporated

Risk-Adjusted Performance

Very Weak

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

Cadre Holdings

Risk-Adjusted Performance

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 latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Ducommun Incorporated and Cadre Holdings

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

The idea behind Ducommun Incorporated and Cadre Holdings 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.