Correlation Between Dorel Industries and Touchstone Exploration

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

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

Diversification Opportunities for Dorel Industries and Touchstone Exploration

0.73

Correlation Coefficient

Dorel Industries  Touchstone Exploration

Poor diversification

The 3 months correlation between Dorel and Touchstone is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Dorel Industries and Touchstone Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Exploration 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 Touchstone Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Exploration has no effect on the direction of Dorel Industries i.e., Dorel Industries and Touchstone Exploration go up and down completely randomly.

Pair Corralation between Dorel Industries and Touchstone Exploration

Assuming the 90 days trading horizon Dorel Industries is expected to under-perform the Touchstone Exploration. But the stock apears to be less risky and, when comparing its historical volatility, Dorel Industries is 1.76 times less risky than Touchstone Exploration. The stock trades about -0.27 of its potential returns per unit of risk. The Touchstone Exploration is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  59.00  in Touchstone Exploration on September 12, 2024 and sell it today you would lose (18.00) from holding Touchstone Exploration or give up 30.51% 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.  Touchstone Exploration

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 weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Touchstone Exploration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Touchstone Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Dorel Industries and Touchstone Exploration

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

The idea behind Dorel Industries and Touchstone Exploration 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.