Correlation Between Dover and IDEX

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

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

Diversification Opportunities for Dover and IDEX

0.68

Correlation Coefficient

Dover  IDEX

Poor diversification

The 3 months correlation between Dover and IDEX is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Dover and IDEX Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDEX and Dover 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 Dover are associated (or correlated) with IDEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDEX has no effect on the direction of Dover i.e., Dover and IDEX go up and down completely randomly.

Pair Corralation between Dover and IDEX

Considering the 90-day investment horizon Dover is expected to generate 1.07 times more return on investment than IDEX. However, Dover is 1.07 times more volatile than IDEX Corporation. It trades about 0.05 of its potential returns per unit of risk. IDEX Corporation is currently generating about -0.31 per unit of risk. If you would invest  17,553  in Dover on February 1, 2024 and sell it today you would earn a total of  238.00  from holding Dover or generate 1.36% return on investment over 90 days.

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

Dover  vs.  IDEX Corp.

Dover

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dover are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Dover showed solid returns over the last few months and may actually be approaching a breakup point.

IDEX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IDEX Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, IDEX is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dover and IDEX

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

The idea behind Dover and IDEX Corporation 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 Transaction History module to view history of all your transactions and understand their impact on performance.