Correlation Between Dorel Industries and Ford

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

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

Diversification Opportunities for Dorel Industries and Ford

0.06

Correlation Coefficient

Dorel Industries  Ford

Significant diversification

The 3 months correlation between Dorel and Ford is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Dorel Industries and Ford Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ford Motor and Dorel Industries 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 Dorel Industries are associated (or correlated) with Ford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ford Motor has no effect on the direction of Dorel Industries i.e., Dorel Industries and Ford go up and down completely randomly.

Pair Corralation between Dorel Industries and Ford

If you would invest  2,328  in Ford Motor on February 21, 2024 and sell it today you would earn a total of  62.00  from holding Ford Motor or generate 2.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	4.76%
Values	Daily Returns

Dorel Industries  vs.  Ford Motor

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. Despite nearly stable fundamental drivers, Dorel Industries is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Ford Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Ford is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Dorel Industries and Ford

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

The idea behind Dorel Industries and Ford Motor 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.