Correlation Between Velan and Dorel Industries

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

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

Diversification Opportunities for Velan and Dorel Industries

-0.77

Correlation Coefficient

Velan  Dorel Industries

Pay attention - limited upside

The 3 months correlation between Velan and Dorel is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Velan Inc and Dorel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dorel Industries and Velan 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 Velan Inc 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 Velan i.e., Velan and Dorel Industries go up and down completely randomly.

Pair Corralation between Velan and Dorel Industries

Assuming the 90 days trading horizon Velan Inc is expected to generate 1.44 times more return on investment than Dorel Industries. However, Velan is 1.44 times more volatile than Dorel Industries. It trades about 0.25 of its potential returns per unit of risk. Dorel Industries is currently generating about -0.19 per unit of risk. If you would invest  630.00  in Velan Inc on September 3, 2024 and sell it today you would earn a total of  470.00  from holding Velan Inc or generate 74.6% return on investment over 90 days.

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

Velan Inc  vs.  Dorel Industries

Velan Inc

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Velan Inc are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Velan displayed 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. 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.

Pair Trading with Velan and Dorel Industries

The main advantage of trading using opposite Velan and Dorel Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Velan 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 Velan Inc 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.