Correlation Between Strattec Security and Douglas Dynamics

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

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

Diversification Opportunities for Strattec Security and Douglas Dynamics

-0.15

Correlation Coefficient

Strattec Security  Douglas Dynamics

Good diversification

The 3 months correlation between Strattec and Douglas is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Strattec Security and Douglas Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Douglas Dynamics and Strattec Security 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 Strattec Security 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 Strattec Security i.e., Strattec Security and Douglas Dynamics go up and down completely randomly.

Pair Corralation between Strattec Security and Douglas Dynamics

Given the investment horizon of 90 days Strattec Security is expected to under-perform the Douglas Dynamics. In addition to that, Strattec Security is 2.01 times more volatile than Douglas Dynamics. It trades about -0.18 of its total potential returns per unit of risk. Douglas Dynamics is currently generating about -0.32 per unit of volatility. If you would invest  2,548  in Douglas Dynamics on October 9, 2024 and sell it today you would lose (187.00) from holding Douglas Dynamics or give up 7.34% of portfolio value over 90 days.

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

Strattec Security  vs.  Douglas Dynamics

Strattec Security

Risk-Adjusted Performance

0 of 100

Weak

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

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 latest unfluctuating performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Strattec Security and Douglas Dynamics

The main advantage of trading using opposite Strattec Security and Douglas Dynamics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strattec Security 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 Strattec Security 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.