Correlation Between Dorman Products and Lasertec

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

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

Diversification Opportunities for Dorman Products and Lasertec

0.32

Correlation Coefficient

Dorman Products  Lasertec

Weak diversification

The 3 months correlation between Dorman and Lasertec is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Dorman Products and Lasertec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lasertec 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 Lasertec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lasertec has no effect on the direction of Dorman Products i.e., Dorman Products and Lasertec go up and down completely randomly.

Pair Corralation between Dorman Products and Lasertec

Given the investment horizon of 90 days Dorman Products is expected to generate 0.98 times more return on investment than Lasertec. However, Dorman Products is 1.02 times less risky than Lasertec. It trades about -0.04 of its potential returns per unit of risk. Lasertec is currently generating about -0.08 per unit of risk. If you would invest  13,087  in Dorman Products on December 22, 2024 and sell it today you would lose (542.00) from holding Dorman Products or give up 4.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.85%
Values	Daily Returns

Dorman Products  vs.  Lasertec

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 very healthy basic indicators, Dorman Products is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Lasertec

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lasertec has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Dorman Products and Lasertec

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

The idea behind Dorman Products and Lasertec 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.