Correlation Between Dorel Industries and Trican Well

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

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

Diversification Opportunities for Dorel Industries and Trican Well

0.45

Correlation Coefficient

Dorel Industries  Trican Well

Very weak diversification

The 3 months correlation between Dorel and Trican is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Dorel Industries and Trican Well Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trican Well Service 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 Trican Well. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trican Well Service has no effect on the direction of Dorel Industries i.e., Dorel Industries and Trican Well go up and down completely randomly.

Pair Corralation between Dorel Industries and Trican Well

Assuming the 90 days trading horizon Dorel Industries is expected to under-perform the Trican Well. In addition to that, Dorel Industries is 3.07 times more volatile than Trican Well Service. It trades about -0.08 of its total potential returns per unit of risk. Trican Well Service is currently generating about -0.02 per unit of volatility. If you would invest  472.00  in Trican Well Service on December 22, 2024 and sell it today you would lose (17.00) from holding Trican Well Service or give up 3.6% 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.  Trican Well Service

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.

Trican Well Service

Risk-Adjusted Performance

Very Weak

Over the last 90 days Trican Well Service has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Trican Well 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 Trican Well

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

The idea behind Dorel Industries and Trican Well Service 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.