Correlation Between Gentex and Dorman Products
Can any of the company-specific risk be diversified away by investing in both Gentex and Dorman Products 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 Gentex and Dorman Products into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gentex and Dorman Products, you can compare the effects of market volatilities on Gentex and Dorman Products 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 Gentex with a short position of Dorman Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gentex and Dorman Products.
Diversification Opportunities for Gentex and Dorman Products
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Gentex and Dorman is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Gentex and Dorman Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dorman Products and Gentex 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 Gentex are associated (or correlated) with Dorman Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dorman Products has no effect on the direction of Gentex i.e., Gentex and Dorman Products go up and down completely randomly.
Pair Corralation between Gentex and Dorman Products
Given the investment horizon of 90 days Gentex is expected to under-perform the Dorman Products. But the stock apears to be less risky and, when comparing its historical volatility, Gentex is 1.8 times less risky than Dorman Products. The stock trades about -0.43 of its potential returns per unit of risk. The Dorman Products is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest 9,347 in Dorman Products on January 20, 2024 and sell it today you would lose (556.00) from holding Dorman Products or give up 5.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Gentex vs. Dorman Products
Performance |
| Timeline |
| Gentex |
| Dorman Products |
Gentex and Dorman Products Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gentex and Dorman Products
The main advantage of trading using opposite Gentex and Dorman Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gentex position performs unexpectedly, Dorman Products 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 Dorman Products will offset losses from the drop in Dorman Products' long position.The idea behind Gentex and Dorman Products 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.| Dorman Products vs. Microvast Holdings | Dorman Products vs. EVgo Equity Warrants | Dorman Products vs. Xos Inc | Dorman Products vs. AEye Inc |
Check out your portfolio center.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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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