Correlation Between Dorman Products and Xos

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

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

Diversification Opportunities for Dorman Products and Xos

-0.47

Correlation Coefficient

Dorman Products  Xos

Very good diversification

The 3 months correlation between Dorman and Xos is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Dorman Products and Xos Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xos Inc 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 Xos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xos Inc has no effect on the direction of Dorman Products i.e., Dorman Products and Xos go up and down completely randomly.

Pair Corralation between Dorman Products and Xos

Given the investment horizon of 90 days Dorman Products is expected to generate 0.33 times more return on investment than Xos. However, Dorman Products is 2.99 times less risky than Xos. It trades about 0.05 of its potential returns per unit of risk. Xos Inc is currently generating about -0.04 per unit of risk. If you would invest  9,002  in Dorman Products on October 4, 2024 and sell it today you would earn a total of  3,841  from holding Dorman Products or generate 42.67% return on investment over 90 days.

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

Dorman Products  vs.  Xos Inc

Dorman Products

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dorman Products are ranked lower than 10 (%) 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.

Xos Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xos Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Dorman Products and Xos

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

The idea behind Dorman Products and Xos Inc 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.