Correlation Between Holley and Dorman Products

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

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

Diversification Opportunities for Holley and Dorman Products

-0.1

Correlation Coefficient

Holley  Dorman Products

Good diversification

The 3 months correlation between Holley and Dorman is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Holley Inc and Dorman Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dorman Products and Holley 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 Holley Inc are associated (or correlated) with Dorman Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dorman Products has no effect on the direction of Holley i.e., Holley and Dorman Products go up and down completely randomly.

Pair Corralation between Holley and Dorman Products

Given the investment horizon of 90 days Holley is expected to generate 1.24 times less return on investment than Dorman Products. In addition to that, Holley is 1.89 times more volatile than Dorman Products. It trades about 0.02 of its total potential returns per unit of risk. Dorman Products is currently generating about 0.05 per unit of volatility. If you would invest  8,483  in Dorman Products on November 28, 2024 and sell it today you would earn a total of  4,098  from holding Dorman Products or generate 48.3% return on investment over 90 days.

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

Holley Inc  vs.  Dorman Products

Holley Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Holley Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Holley is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

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 latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Holley and Dorman Products

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

The idea behind Holley Inc and Dorman Products 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.