Correlation Between Dorel Industries and Sparx Technology

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

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

Diversification Opportunities for Dorel Industries and Sparx Technology

-0.81

Correlation Coefficient

Dorel Industries  Sparx Technology

Pay attention - limited upside

The 3 months correlation between Dorel and Sparx is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Dorel Industries and Sparx Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparx Technology 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 Sparx Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparx Technology has no effect on the direction of Dorel Industries i.e., Dorel Industries and Sparx Technology go up and down completely randomly.

Pair Corralation between Dorel Industries and Sparx Technology

Assuming the 90 days trading horizon Dorel Industries is expected to under-perform the Sparx Technology. In addition to that, Dorel Industries is 1.64 times more volatile than Sparx Technology. It trades about -0.31 of its total potential returns per unit of risk. Sparx Technology is currently generating about 0.13 per unit of volatility. If you would invest  2,448  in Sparx Technology on August 30, 2024 and sell it today you would earn a total of  144.00  from holding Sparx Technology or generate 5.88% return on investment over 90 days.

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

Dorel Industries  vs.  Sparx Technology

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 December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Sparx Technology

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sparx Technology are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Sparx Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dorel Industries and Sparx Technology

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

The idea behind Dorel Industries and Sparx Technology 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.