Correlation Between Douglas Dynamics and Greenbrier Companies

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

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

Diversification Opportunities for Douglas Dynamics and Greenbrier Companies

-0.65

Correlation Coefficient

Douglas Dynamics  Greenbrier Companies

Excellent diversification

The 3 months correlation between Douglas and Greenbrier is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Douglas Dynamics and Greenbrier Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Greenbrier Companies and Douglas Dynamics 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 Douglas Dynamics are associated (or correlated) with Greenbrier Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Greenbrier Companies has no effect on the direction of Douglas Dynamics i.e., Douglas Dynamics and Greenbrier Companies go up and down completely randomly.

Pair Corralation between Douglas Dynamics and Greenbrier Companies

Given the investment horizon of 90 days Douglas Dynamics is expected to under-perform the Greenbrier Companies. But the stock apears to be less risky and, when comparing its historical volatility, Douglas Dynamics is 1.14 times less risky than Greenbrier Companies. The stock trades about -0.02 of its potential returns per unit of risk. The Greenbrier Companies is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  4,710  in Greenbrier Companies on September 3, 2024 and sell it today you would earn a total of  2,090  from holding Greenbrier Companies or generate 44.37% return on investment over 90 days.

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

Douglas Dynamics  vs.  Greenbrier Companies

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.

Greenbrier Companies

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Greenbrier Companies are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, Greenbrier Companies showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Douglas Dynamics and Greenbrier Companies

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

The idea behind Douglas Dynamics and Greenbrier Companies 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.