Correlation Between Dorel Industries and Novo Resources

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

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

Diversification Opportunities for Dorel Industries and Novo Resources

0.55

Correlation Coefficient

Dorel Industries  Novo Resources

Very weak diversification

The 3 months correlation between Dorel and Novo is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Dorel Industries and Novo Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novo Resources Corp 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 Novo Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novo Resources Corp has no effect on the direction of Dorel Industries i.e., Dorel Industries and Novo Resources go up and down completely randomly.

Pair Corralation between Dorel Industries and Novo Resources

Assuming the 90 days trading horizon Dorel Industries is expected to under-perform the Novo Resources. But the stock apears to be less risky and, when comparing its historical volatility, Dorel Industries is 1.05 times less risky than Novo Resources. The stock trades about -0.02 of its potential returns per unit of risk. The Novo Resources Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  9.50  in Novo Resources Corp on October 22, 2024 and sell it today you would earn a total of  0.00  from holding Novo Resources Corp or generate 0.0% return on investment over 90 days.

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

Dorel Industries  vs.  Novo Resources Corp

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 comparatively stable basic indicators, Dorel Industries is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Novo Resources Corp

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Novo Resources Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Novo Resources 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 Novo Resources

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

The idea behind Dorel Industries and Novo Resources Corp 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.