Correlation Between Element Fleet and Dorel Industries

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

By analyzing existing cross correlation between Element Fleet Management and Dorel Industries, you can compare the effects of market volatilities on Element Fleet and Dorel Industries 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 Element Fleet with a short position of Dorel Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Element Fleet and Dorel Industries.

Diversification Opportunities for Element Fleet and Dorel Industries

-0.18

Correlation Coefficient

Element Fleet  Dorel Industries

Good diversification

The 3 months correlation between Element and Dorel is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Element Fleet Management and Dorel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dorel Industries and Element Fleet 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 Element Fleet Management are associated (or correlated) with Dorel Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dorel Industries has no effect on the direction of Element Fleet i.e., Element Fleet and Dorel Industries go up and down completely randomly.

Pair Corralation between Element Fleet and Dorel Industries

Assuming the 90 days trading horizon Element Fleet Management is expected to under-perform the Dorel Industries. But the stock apears to be less risky and, when comparing its historical volatility, Element Fleet Management is 4.54 times less risky than Dorel Industries. The stock trades about -0.02 of its potential returns per unit of risk. The Dorel Industries is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  441.00  in Dorel Industries on December 2, 2024 and sell it today you would lose (29.00) from holding Dorel Industries or give up 6.58% of portfolio value over 90 days.

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

Element Fleet Management  vs.  Dorel Industries

Element Fleet Management

Risk-Adjusted Performance

Very Weak

Over the last 90 days Element Fleet Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Element Fleet is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Dorel Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dorel Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Dorel Industries is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Element Fleet and Dorel Industries

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

The idea behind Element Fleet Management and Dorel Industries 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.