Correlation Between Dorel Industries and CES Energy

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

By analyzing existing cross correlation between Dorel Industries and CES Energy Solutions, you can compare the effects of market volatilities on Dorel Industries and CES Energy 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 Dorel Industries with a short position of CES Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dorel Industries and CES Energy.

Diversification Opportunities for Dorel Industries and CES Energy

0.65

Correlation Coefficient

Dorel Industries  CES Energy

Poor diversification

The 3 months correlation between Dorel and CES is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Dorel Industries and CES Energy Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CES Energy Solutions and Dorel Industries 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 Dorel Industries are associated (or correlated) with CES Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CES Energy Solutions has no effect on the direction of Dorel Industries i.e., Dorel Industries and CES Energy go up and down completely randomly.

Pair Corralation between Dorel Industries and CES Energy

Assuming the 90 days trading horizon Dorel Industries is expected to under-perform the CES Energy. In addition to that, Dorel Industries is 2.83 times more volatile than CES Energy Solutions. It trades about -0.13 of its total potential returns per unit of risk. CES Energy Solutions is currently generating about -0.18 per unit of volatility. If you would invest  968.00  in CES Energy Solutions on December 29, 2024 and sell it today you would lose (213.00) from holding CES Energy Solutions or give up 22.0% of portfolio value over 90 days.

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

Dorel Industries  vs.  CES Energy Solutions

Dorel Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dorel Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

CES Energy Solutions

Risk-Adjusted Performance

Very Weak

Over the last 90 days CES Energy Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Dorel Industries and CES Energy

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

The idea behind Dorel Industries and CES Energy Solutions 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.