Correlation Between Douglas Dynamics and Linamar

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

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

Diversification Opportunities for Douglas Dynamics and Linamar

0.01

Correlation Coefficient

Douglas Dynamics  Linamar

Significant diversification

The 3 months correlation between Douglas and Linamar is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Douglas Dynamics and Linamar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linamar 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 Linamar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Linamar has no effect on the direction of Douglas Dynamics i.e., Douglas Dynamics and Linamar go up and down completely randomly.

Pair Corralation between Douglas Dynamics and Linamar

Given the investment horizon of 90 days Douglas Dynamics is expected to generate 0.9 times more return on investment than Linamar. However, Douglas Dynamics is 1.11 times less risky than Linamar. It trades about 0.09 of its potential returns per unit of risk. Linamar is currently generating about -0.13 per unit of risk. If you would invest  2,559  in Douglas Dynamics on November 29, 2024 and sell it today you would earn a total of  196.00  from holding Douglas Dynamics or generate 7.66% return on investment over 90 days.

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

Douglas Dynamics  vs.  Linamar

Douglas Dynamics

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Douglas Dynamics are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Douglas Dynamics may actually be approaching a critical reversion point that can send shares even higher in March 2025.

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 unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Douglas Dynamics and Linamar

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

The idea behind Douglas Dynamics and Linamar 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..