Correlation Between Dorman Products and Inter Parfums

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Can any of the company-specific risk be diversified away by investing in both Dorman Products and Inter Parfums 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 Inter Parfums into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dorman Products and Inter Parfums, you can compare the effects of market volatilities on Dorman Products and Inter Parfums 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 Inter Parfums. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dorman Products and Inter Parfums.

Diversification Opportunities for Dorman Products and Inter Parfums

0.75
  Correlation Coefficient

Poor diversification

The 3 months correlation between Dorman and Inter is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Dorman Products and Inter Parfums in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inter Parfums 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 Inter Parfums. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inter Parfums has no effect on the direction of Dorman Products i.e., Dorman Products and Inter Parfums go up and down completely randomly.

Pair Corralation between Dorman Products and Inter Parfums

Given the investment horizon of 90 days Dorman Products is expected to under-perform the Inter Parfums. In addition to that, Dorman Products is 1.05 times more volatile than Inter Parfums. It trades about -0.01 of its total potential returns per unit of risk. Inter Parfums is currently generating about 0.22 per unit of volatility. If you would invest  13,032  in Inter Parfums on October 20, 2024 and sell it today you would earn a total of  827.00  from holding Inter Parfums or generate 6.35% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Dorman Products  vs.  Inter Parfums

 Performance 
       Timeline  
Dorman Products 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Dorman Products are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Dorman Products may actually be approaching a critical reversion point that can send shares even higher in February 2025.
Inter Parfums 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Inter Parfums are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Inter Parfums reported solid returns over the last few months and may actually be approaching a breakup point.

Dorman Products and Inter Parfums Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Dorman Products and Inter Parfums

The main advantage of trading using opposite Dorman Products and Inter Parfums positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dorman Products position performs unexpectedly, Inter Parfums 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 Inter Parfums will offset losses from the drop in Inter Parfums' long position.
The idea behind Dorman Products and Inter Parfums 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.
Check out your portfolio center.
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.

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