Correlation Between Image Systems and Dometic Group

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

By analyzing existing cross correlation between Image Systems AB and Dometic Group AB, you can compare the effects of market volatilities on Image Systems and Dometic Group 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 Image Systems with a short position of Dometic Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Image Systems and Dometic Group.

Diversification Opportunities for Image Systems and Dometic Group

-0.53

Correlation Coefficient

Image Systems  Dometic Group

Excellent diversification

The 3 months correlation between Image and Dometic is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Image Systems AB and Dometic Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dometic Group AB and Image Systems 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 Image Systems AB are associated (or correlated) with Dometic Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dometic Group AB has no effect on the direction of Image Systems i.e., Image Systems and Dometic Group go up and down completely randomly.

Pair Corralation between Image Systems and Dometic Group

Assuming the 90 days horizon Image Systems AB is expected to generate 2.8 times more return on investment than Dometic Group. However, Image Systems is 2.8 times more volatile than Dometic Group AB. It trades about 0.03 of its potential returns per unit of risk. Dometic Group AB is currently generating about -0.02 per unit of risk. If you would invest  198.00  in Image Systems AB on November 28, 2024 and sell it today you would earn a total of  2.00  from holding Image Systems AB or generate 1.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.31%
Values	Daily Returns

Image Systems AB  vs.  Dometic Group AB

Image Systems AB

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Image Systems AB are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Image Systems may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Dometic Group AB

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Image Systems and Dometic Group

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

The idea behind Image Systems AB and Dometic Group AB 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.