Correlation Between Linamar and Dorman Products

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

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

Diversification Opportunities for Linamar and Dorman Products

0.43

Correlation Coefficient

Linamar  Dorman Products

Very weak diversification

The 3 months correlation between Linamar and Dorman is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Linamar and Dorman Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dorman Products and Linamar 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 Linamar 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 Linamar i.e., Linamar and Dorman Products go up and down completely randomly.

Pair Corralation between Linamar and Dorman Products

Assuming the 90 days horizon Linamar is expected to under-perform the Dorman Products. In addition to that, Linamar is 1.23 times more volatile than Dorman Products. It trades about -0.09 of its total potential returns per unit of risk. Dorman Products is currently generating about -0.08 per unit of volatility. If you would invest  13,125  in Dorman Products on December 29, 2024 and sell it today you would lose (1,054) from holding Dorman Products or give up 8.03% of portfolio value over 90 days.

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

Linamar  vs.  Dorman Products

Linamar

Risk-Adjusted Performance

Very Weak

Over the last 90 days Linamar has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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 Linamar and Dorman Products

The main advantage of trading using opposite Linamar and Dorman Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Linamar 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 Linamar 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.