Correlation Between Dye Durham and Cargojet

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

By analyzing existing cross correlation between Dye Durham and Cargojet, you can compare the effects of market volatilities on Dye Durham and Cargojet 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 Dye Durham with a short position of Cargojet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dye Durham and Cargojet.

Diversification Opportunities for Dye Durham and Cargojet

0.67

Correlation Coefficient

Dye Durham  Cargojet

Poor diversification

The 3 months correlation between Dye and Cargojet is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Dye Durham and Cargojet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cargojet and Dye Durham 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 Dye Durham are associated (or correlated) with Cargojet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cargojet has no effect on the direction of Dye Durham i.e., Dye Durham and Cargojet go up and down completely randomly.

Pair Corralation between Dye Durham and Cargojet

Assuming the 90 days trading horizon Dye Durham is expected to under-perform the Cargojet. In addition to that, Dye Durham is 1.71 times more volatile than Cargojet. It trades about -0.13 of its total potential returns per unit of risk. Cargojet is currently generating about -0.13 per unit of volatility. If you would invest  10,237  in Cargojet on December 29, 2024 and sell it today you would lose (1,975) from holding Cargojet or give up 19.29% of portfolio value over 90 days.

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

Dye Durham  vs.  Cargojet

Dye Durham

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dye Durham 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 fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Cargojet

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cargojet 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 April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Dye Durham and Cargojet

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

The idea behind Dye Durham and Cargojet 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.