Correlation Between Dorel Industries and Cineplex

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

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

Diversification Opportunities for Dorel Industries and Cineplex

-0.69

Correlation Coefficient

Dorel Industries  Cineplex

Excellent diversification

The 3 months correlation between Dorel and Cineplex is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Dorel Industries and Cineplex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cineplex 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 Cineplex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cineplex has no effect on the direction of Dorel Industries i.e., Dorel Industries and Cineplex go up and down completely randomly.

Pair Corralation between Dorel Industries and Cineplex

Assuming the 90 days trading horizon Dorel Industries is expected to generate 5.97 times less return on investment than Cineplex. In addition to that, Dorel Industries is 1.4 times more volatile than Cineplex. It trades about 0.01 of its total potential returns per unit of risk. Cineplex is currently generating about 0.06 per unit of volatility. If you would invest  759.00  in Cineplex on October 5, 2024 and sell it today you would earn a total of  487.00  from holding Cineplex or generate 64.16% return on investment over 90 days.

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

Dorel Industries  vs.  Cineplex

Dorel Industries

Risk-Adjusted Performance

0 of 100

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 February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Cineplex

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cineplex are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Cineplex displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dorel Industries and Cineplex

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

The idea behind Dorel Industries and Cineplex 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.

Check out your portfolio center.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.