Correlation Between Optec International and Douglas Dynamics

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

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

Diversification Opportunities for Optec International and Douglas Dynamics

-0.07

Correlation Coefficient

Optec International  Douglas Dynamics

Good diversification

The 3 months correlation between Optec and Douglas is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Optec International and Douglas Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Douglas Dynamics and Optec International 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 Optec International are associated (or correlated) with Douglas Dynamics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Douglas Dynamics has no effect on the direction of Optec International i.e., Optec International and Douglas Dynamics go up and down completely randomly.

Pair Corralation between Optec International and Douglas Dynamics

If you would invest  0.05  in Optec International on September 14, 2024 and sell it today you would earn a total of  0.00  from holding Optec International or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.59%
Values	Daily Returns

Optec International  vs.  Douglas Dynamics

Optec International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Optec International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Optec International is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Douglas Dynamics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Douglas Dynamics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Douglas Dynamics is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Optec International and Douglas Dynamics

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

The idea behind Optec International and Douglas Dynamics 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.