Correlation Between Dorman Products and Lear

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

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

Diversification Opportunities for Dorman Products and Lear

0.51

Correlation Coefficient

Dorman Products  Lear

Very weak diversification

The 3 months correlation between Dorman and Lear is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Dorman Products and Lear Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lear 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 Lear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lear has no effect on the direction of Dorman Products i.e., Dorman Products and Lear go up and down completely randomly.

Pair Corralation between Dorman Products and Lear

Given the investment horizon of 90 days Dorman Products is expected to generate 1.19 times more return on investment than Lear. However, Dorman Products is 1.19 times more volatile than Lear Corporation. It trades about 0.05 of its potential returns per unit of risk. Lear Corporation is currently generating about -0.03 per unit of risk. If you would invest  8,483  in Dorman Products on November 28, 2024 and sell it today you would earn a total of  4,098  from holding Dorman Products or generate 48.3% return on investment over 90 days.

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

Dorman Products  vs.  Lear Corp.

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.

Lear

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lear Corporation are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Lear is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dorman Products and Lear

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

The idea behind Dorman Products and Lear Corporation 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.