Correlation Between Dorel Industries and China Yuchai

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

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

Diversification Opportunities for Dorel Industries and China Yuchai

0.0

Correlation Coefficient

Dorel Industries  China Yuchai

Pay attention - limited upside

The 3 months correlation between Dorel and China is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Dorel Industries and China Yuchai International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Yuchai Interna 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 China Yuchai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Yuchai Interna has no effect on the direction of Dorel Industries i.e., Dorel Industries and China Yuchai go up and down completely randomly.

Pair Corralation between Dorel Industries and China Yuchai

If you would invest  1,044  in China Yuchai International on December 28, 2024 and sell it today you would earn a total of  771.00  from holding China Yuchai International or generate 73.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Dorel Industries  vs.  China Yuchai International

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. Despite nearly stable fundamental drivers, Dorel Industries is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

China Yuchai Interna

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in China Yuchai International are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, China Yuchai exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dorel Industries and China Yuchai

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

The idea behind Dorel Industries and China Yuchai International 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.