Correlation Between Rogers Communications and Doman Building

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

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

Diversification Opportunities for Rogers Communications and Doman Building

-0.6

Correlation Coefficient

Rogers Communications  Doman Building

Excellent diversification

The 3 months correlation between Rogers and Doman is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Rogers Communications and Doman Building Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Doman Building Materials and Rogers Communications 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 Rogers Communications are associated (or correlated) with Doman Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Doman Building Materials has no effect on the direction of Rogers Communications i.e., Rogers Communications and Doman Building go up and down completely randomly.

Pair Corralation between Rogers Communications and Doman Building

Assuming the 90 days trading horizon Rogers Communications is expected to under-perform the Doman Building. But the stock apears to be less risky and, when comparing its historical volatility, Rogers Communications is 1.49 times less risky than Doman Building. The stock trades about -0.11 of its potential returns per unit of risk. The Doman Building Materials is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  736.00  in Doman Building Materials on September 14, 2024 and sell it today you would earn a total of  195.00  from holding Doman Building Materials or generate 26.49% return on investment over 90 days.

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

Rogers Communications  vs.  Doman Building Materials

Rogers Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rogers Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Doman Building Materials

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Doman Building Materials are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Doman Building displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rogers Communications and Doman Building

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

The idea behind Rogers Communications and Doman Building Materials 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.