Correlation Between Dorel Industries and Chemtrade Logistics

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

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

Diversification Opportunities for Dorel Industries and Chemtrade Logistics

-0.37

Correlation Coefficient

Dorel Industries  Chemtrade Logistics

Very good diversification

The 3 months correlation between Dorel and Chemtrade is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Dorel Industries and Chemtrade Logistics Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chemtrade Logistics 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 Chemtrade Logistics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chemtrade Logistics has no effect on the direction of Dorel Industries i.e., Dorel Industries and Chemtrade Logistics go up and down completely randomly.

Pair Corralation between Dorel Industries and Chemtrade Logistics

Assuming the 90 days trading horizon Dorel Industries is expected to under-perform the Chemtrade Logistics. In addition to that, Dorel Industries is 2.89 times more volatile than Chemtrade Logistics Income. It trades about -0.03 of its total potential returns per unit of risk. Chemtrade Logistics Income is currently generating about -0.04 per unit of volatility. If you would invest  1,103  in Chemtrade Logistics Income on October 9, 2024 and sell it today you would lose (38.00) from holding Chemtrade Logistics Income or give up 3.45% of portfolio value over 90 days.

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

Dorel Industries  vs.  Chemtrade Logistics Income

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 latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Chemtrade Logistics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chemtrade Logistics Income has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Chemtrade Logistics is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dorel Industries and Chemtrade Logistics

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

The idea behind Dorel Industries and Chemtrade Logistics Income 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.