Correlation Between Dorel Industries and Pason Systems

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

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

Diversification Opportunities for Dorel Industries and Pason Systems

0.42

Correlation Coefficient

Dorel Industries  Pason Systems

Very weak diversification

The 3 months correlation between Dorel and Pason is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Dorel Industries and Pason Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pason Systems 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 Pason Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pason Systems has no effect on the direction of Dorel Industries i.e., Dorel Industries and Pason Systems go up and down completely randomly.

Pair Corralation between Dorel Industries and Pason Systems

Assuming the 90 days trading horizon Dorel Industries is expected to under-perform the Pason Systems. In addition to that, Dorel Industries is 3.57 times more volatile than Pason Systems. It trades about -0.12 of its total potential returns per unit of risk. Pason Systems is currently generating about 0.01 per unit of volatility. If you would invest  1,312  in Pason Systems on December 30, 2024 and sell it today you would lose (2.00) from holding Pason Systems or give up 0.15% of portfolio value over 90 days.

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

Dorel Industries  vs.  Pason Systems

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

Pason Systems

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Dorel Industries and Pason Systems

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

The idea behind Dorel Industries and Pason Systems 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.