Correlation Between Dorman Products and Xpel

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

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

Diversification Opportunities for Dorman Products and Xpel

0.55

Correlation Coefficient

Dorman Products  Xpel

Very weak diversification

The 3 months correlation between Dorman and Xpel is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Dorman Products and Xpel Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xpel 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 Xpel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xpel Inc has no effect on the direction of Dorman Products i.e., Dorman Products and Xpel go up and down completely randomly.

Pair Corralation between Dorman Products and Xpel

Given the investment horizon of 90 days Dorman Products is expected to generate 0.98 times more return on investment than Xpel. However, Dorman Products is 1.02 times less risky than Xpel. It trades about -0.26 of its potential returns per unit of risk. Xpel Inc is currently generating about -0.52 per unit of risk. If you would invest  13,925  in Dorman Products on October 6, 2024 and sell it today you would lose (916.00) from holding Dorman Products or give up 6.58% of portfolio value over 90 days.

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

Dorman Products  vs.  Xpel Inc

Dorman Products

Risk-Adjusted Performance

11 of 100

OK

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.

Xpel Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xpel Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Xpel is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Dorman Products and Xpel

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

The idea behind Dorman Products and Xpel 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.