Correlation Between Hexcel and Dorman Products

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

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

Diversification Opportunities for Hexcel and Dorman Products

0.25

Correlation Coefficient

Hexcel  Dorman Products

Modest diversification

The 3 months correlation between Hexcel and Dorman is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Hexcel and Dorman Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dorman Products and Hexcel 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 Hexcel are associated (or correlated) with Dorman Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dorman Products has no effect on the direction of Hexcel i.e., Hexcel and Dorman Products go up and down completely randomly.

Pair Corralation between Hexcel and Dorman Products

Considering the 90-day investment horizon Hexcel is expected to generate 0.95 times more return on investment than Dorman Products. However, Hexcel is 1.05 times less risky than Dorman Products. It trades about 0.22 of its potential returns per unit of risk. Dorman Products is currently generating about 0.07 per unit of risk. If you would invest  5,012  in Hexcel on April 25, 2025 and sell it today you would earn a total of  1,224  from holding Hexcel or generate 24.42% return on investment over 90 days.

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

Hexcel  vs.  Dorman Products

Hexcel

Risk-Adjusted Performance

Solid

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

Dorman Products

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dorman Products are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Dorman Products may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Hexcel and Dorman Products

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

The idea behind Hexcel and Dorman Products 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.