Correlation Between Dorman Products and Allego

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

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

Diversification Opportunities for Dorman Products and Allego

0.01

Correlation Coefficient

Dorman Products  Allego

Significant diversification

The 3 months correlation between Dorman and Allego is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Dorman Products and Allego Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allego Inc and Dorman Products 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 Dorman Products are associated (or correlated) with Allego. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allego Inc has no effect on the direction of Dorman Products i.e., Dorman Products and Allego go up and down completely randomly.

Pair Corralation between Dorman Products and Allego

Given the investment horizon of 90 days Dorman Products is expected to generate 1.04 times less return on investment than Allego. But when comparing it to its historical volatility, Dorman Products is 6.73 times less risky than Allego. It trades about 0.2 of its potential returns per unit of risk. Allego Inc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  228.00  in Allego Inc on August 31, 2024 and sell it today you would lose (37.00) from holding Allego Inc or give up 16.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	63.49%
Values	Daily Returns

Dorman Products  vs.  Allego Inc

Dorman Products

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dorman Products are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Dorman Products displayed solid returns over the last few months and may actually be approaching a breakup point.

Allego Inc

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Allego Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak essential indicators, Allego reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dorman Products and Allego

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

The idea behind Dorman Products and Allego Inc 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.