Correlation Between Dorel Industries and Total Energy

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

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

Diversification Opportunities for Dorel Industries and Total Energy

-0.89

Correlation Coefficient

Dorel Industries  Total Energy

Pay attention - limited upside

The 3 months correlation between Dorel and Total is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Dorel Industries and Total Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Total Energy Services 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 Total Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Total Energy Services has no effect on the direction of Dorel Industries i.e., Dorel Industries and Total Energy go up and down completely randomly.

Pair Corralation between Dorel Industries and Total Energy

Assuming the 90 days trading horizon Dorel Industries is expected to generate 3.53 times more return on investment than Total Energy. However, Dorel Industries is 3.53 times more volatile than Total Energy Services. It trades about 0.18 of its potential returns per unit of risk. Total Energy Services is currently generating about -0.09 per unit of risk. If you would invest  418.00  in Dorel Industries on October 9, 2024 and sell it today you would earn a total of  70.00  from holding Dorel Industries or generate 16.75% return on investment over 90 days.

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

Dorel Industries  vs.  Total Energy Services

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 latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Total Energy Services

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Total Energy Services are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Total Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dorel Industries and Total Energy

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

The idea behind Dorel Industries and Total Energy Services 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.

Check out your portfolio center.

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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.