Correlation Between Dorel Industries and Caldwell Partners

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

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

Diversification Opportunities for Dorel Industries and Caldwell Partners

-0.43

Correlation Coefficient

Dorel Industries  Caldwell Partners

Very good diversification

The 3 months correlation between Dorel and Caldwell is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Dorel Industries and Caldwell Partners Internationa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caldwell Partners 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 Caldwell Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caldwell Partners has no effect on the direction of Dorel Industries i.e., Dorel Industries and Caldwell Partners go up and down completely randomly.

Pair Corralation between Dorel Industries and Caldwell Partners

Assuming the 90 days trading horizon Dorel Industries is expected to under-perform the Caldwell Partners. But the stock apears to be less risky and, when comparing its historical volatility, Dorel Industries is 1.52 times less risky than Caldwell Partners. The stock trades about -0.3 of its potential returns per unit of risk. The Caldwell Partners International is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  106.00  in Caldwell Partners International on September 28, 2024 and sell it today you would earn a total of  11.00  from holding Caldwell Partners International or generate 10.38% return on investment over 90 days.

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

Dorel Industries  vs.  Caldwell Partners Internationa

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 unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Caldwell Partners

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Caldwell Partners International are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating essential indicators, Caldwell Partners displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dorel Industries and Caldwell Partners

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

The idea behind Dorel Industries and Caldwell Partners International 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.