Correlation Between Flexsteel Industries and Dorel Industries

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

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

Diversification Opportunities for Flexsteel Industries and Dorel Industries

0.54

Correlation Coefficient

Flexsteel Industries  Dorel Industries

Very weak diversification

The 3 months correlation between Flexsteel and Dorel is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Flexsteel Industries and Dorel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dorel Industries and Flexsteel 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 Flexsteel Industries are associated (or correlated) with Dorel Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dorel Industries has no effect on the direction of Flexsteel Industries i.e., Flexsteel Industries and Dorel Industries go up and down completely randomly.

Pair Corralation between Flexsteel Industries and Dorel Industries

If you would invest  3,983  in Flexsteel Industries on September 4, 2024 and sell it today you would earn a total of  2,089  from holding Flexsteel Industries or generate 52.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.59%
Values	Daily Returns

Flexsteel Industries  vs.  Dorel Industries

Flexsteel Industries

Risk-Adjusted Performance

13 of 100

Good

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

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.

Pair Trading with Flexsteel Industries and Dorel Industries

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

The idea behind Flexsteel Industries and Dorel Industries 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.