Correlation Between Dorel Industries and Canfor

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

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

Diversification Opportunities for Dorel Industries and Canfor

-0.71

Correlation Coefficient

Dorel Industries  Canfor

Pay attention - limited upside

The 3 months correlation between Dorel and Canfor is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Dorel Industries and Canfor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canfor 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 Canfor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canfor has no effect on the direction of Dorel Industries i.e., Dorel Industries and Canfor go up and down completely randomly.

Pair Corralation between Dorel Industries and Canfor

Assuming the 90 days trading horizon Dorel Industries is expected to under-perform the Canfor. In addition to that, Dorel Industries is 1.15 times more volatile than Canfor. It trades about -0.19 of its total potential returns per unit of risk. Canfor is currently generating about 0.17 per unit of volatility. If you would invest  1,418  in Canfor on September 3, 2024 and sell it today you would earn a total of  355.00  from holding Canfor or generate 25.04% return on investment over 90 days.

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

Dorel Industries  vs.  Canfor

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 weak 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.

Canfor

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Canfor are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Canfor displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dorel Industries and Canfor

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

The idea behind Dorel Industries and Canfor 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.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.