Correlation Between Winpak and Dorel Industries

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

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

Diversification Opportunities for Winpak and Dorel Industries

-0.51

Correlation Coefficient

Winpak  Dorel Industries

Excellent diversification

The 3 months correlation between Winpak and Dorel is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Winpak and Dorel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dorel Industries and Winpak 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 Winpak are associated (or correlated) with Dorel Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dorel Industries has no effect on the direction of Winpak i.e., Winpak and Dorel Industries go up and down completely randomly.

Pair Corralation between Winpak and Dorel Industries

Assuming the 90 days trading horizon Winpak is expected to generate 0.57 times more return on investment than Dorel Industries. However, Winpak is 1.74 times less risky than Dorel Industries. It trades about 0.07 of its potential returns per unit of risk. Dorel Industries is currently generating about -0.34 per unit of risk. If you would invest  4,533  in Winpak on September 25, 2024 and sell it today you would earn a total of  252.00  from holding Winpak or generate 5.56% return on investment over 90 days.

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

Winpak  vs.  Dorel Industries

Winpak

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Winpak are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward-looking signals, Winpak is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Dorel Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dorel Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Winpak and Dorel Industries

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

The idea behind Winpak and Dorel Industries 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.