Correlation Between Dorman Products and Gentex

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

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

Diversification Opportunities for Dorman Products and Gentex

0.82

Correlation Coefficient

Dorman Products  Gentex

Very poor diversification

The 3 months correlation between Dorman and Gentex is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Dorman Products and Gentex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gentex 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 Gentex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gentex has no effect on the direction of Dorman Products i.e., Dorman Products and Gentex go up and down completely randomly.

Pair Corralation between Dorman Products and Gentex

Given the investment horizon of 90 days Dorman Products is expected to generate 0.83 times more return on investment than Gentex. However, Dorman Products is 1.21 times less risky than Gentex. It trades about -0.15 of its potential returns per unit of risk. Gentex is currently generating about -0.22 per unit of risk. If you would invest  13,998  in Dorman Products on November 28, 2024 and sell it today you would lose (1,597) from holding Dorman Products or give up 11.41% of portfolio value over 90 days.

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

Dorman Products  vs.  Gentex

Dorman Products

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dorman Products 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 healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Gentex

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gentex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Dorman Products and Gentex

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

The idea behind Dorman Products and Gentex 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.