Correlation Between Dorel Industries and Geodrill

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

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

Diversification Opportunities for Dorel Industries and Geodrill

0.68

Correlation Coefficient

Dorel Industries  Geodrill

Poor diversification

The 3 months correlation between Dorel and Geodrill is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Dorel Industries and Geodrill Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geodrill Limited 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 Geodrill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Geodrill Limited has no effect on the direction of Dorel Industries i.e., Dorel Industries and Geodrill go up and down completely randomly.

Pair Corralation between Dorel Industries and Geodrill

Assuming the 90 days trading horizon Dorel Industries is expected to under-perform the Geodrill. In addition to that, Dorel Industries is 3.08 times more volatile than Geodrill Limited. It trades about -0.15 of its total potential returns per unit of risk. Geodrill Limited is currently generating about -0.04 per unit of volatility. If you would invest  307.00  in Geodrill Limited on December 31, 2024 and sell it today you would lose (16.00) from holding Geodrill Limited or give up 5.21% 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.  Geodrill Limited

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

Geodrill Limited

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Dorel Industries and Geodrill

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

The idea behind Dorel Industries and Geodrill Limited 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.