Correlation Between Dorel Industries and Vermilion Energy

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

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

Diversification Opportunities for Dorel Industries and Vermilion Energy

-0.79

Correlation Coefficient

Dorel Industries  Vermilion Energy

Pay attention - limited upside

The 3 months correlation between Dorel and Vermilion is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Dorel Industries and Vermilion Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vermilion Energy 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 Vermilion Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vermilion Energy has no effect on the direction of Dorel Industries i.e., Dorel Industries and Vermilion Energy go up and down completely randomly.

Pair Corralation between Dorel Industries and Vermilion Energy

Assuming the 90 days trading horizon Dorel Industries is expected to under-perform the Vermilion Energy. In addition to that, Dorel Industries is 1.2 times more volatile than Vermilion Energy. It trades about -0.22 of its total potential returns per unit of risk. Vermilion Energy is currently generating about 0.09 per unit of volatility. If you would invest  1,279  in Vermilion Energy on September 4, 2024 and sell it today you would earn a total of  145.00  from holding Vermilion Energy or generate 11.34% 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.  Vermilion Energy

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.

Vermilion Energy

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vermilion Energy are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Vermilion Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Dorel Industries and Vermilion Energy

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

The idea behind Dorel Industries and Vermilion Energy 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.