Correlation Between Dorman Products and SalMar ASA

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

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

Diversification Opportunities for Dorman Products and SalMar ASA

-0.32

Correlation Coefficient

Dorman Products  SalMar ASA

Very good diversification

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

Pair Corralation between Dorman Products and SalMar ASA

Given the investment horizon of 90 days Dorman Products is expected to generate 0.85 times more return on investment than SalMar ASA. However, Dorman Products is 1.18 times less risky than SalMar ASA. It trades about 0.06 of its potential returns per unit of risk. SalMar ASA is currently generating about 0.04 per unit of risk. If you would invest  8,190  in Dorman Products on September 14, 2024 and sell it today you would earn a total of  5,794  from holding Dorman Products or generate 70.74% return on investment over 90 days.

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

Dorman Products  vs.  SalMar ASA

Dorman Products

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dorman Products are ranked lower than 11 (%) 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.

SalMar ASA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SalMar ASA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, SalMar ASA 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 SalMar ASA

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

The idea behind Dorman Products and SalMar ASA 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.