Correlation Between Dorel Industries and Intact Financial

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

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

Diversification Opportunities for Dorel Industries and Intact Financial

-0.77

Correlation Coefficient

Dorel Industries  Intact Financial

Pay attention - limited upside

The 3 months correlation between Dorel and Intact is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Dorel Industries and Intact Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intact Financial 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 Intact Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intact Financial has no effect on the direction of Dorel Industries i.e., Dorel Industries and Intact Financial go up and down completely randomly.

Pair Corralation between Dorel Industries and Intact Financial

Assuming the 90 days trading horizon Dorel Industries is expected to under-perform the Intact Financial. In addition to that, Dorel Industries is 3.43 times more volatile than Intact Financial. It trades about -0.3 of its total potential returns per unit of risk. Intact Financial is currently generating about -0.05 per unit of volatility. If you would invest  27,006  in Intact Financial on August 31, 2024 and sell it today you would lose (317.00) from holding Intact Financial or give up 1.17% of portfolio value over 90 days.

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

Dorel Industries  vs.  Intact Financial

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.

Intact Financial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Intact Financial are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Intact Financial may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Dorel Industries and Intact Financial

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

The idea behind Dorel Industries and Intact Financial 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.