Correlation Between Gentex and Douglas Dynamics

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

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

Diversification Opportunities for Gentex and Douglas Dynamics

0.36

Correlation Coefficient

Gentex  Douglas Dynamics

Weak diversification

The 3 months correlation between Gentex and Douglas is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Gentex and Douglas Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Douglas Dynamics and Gentex 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 Gentex are associated (or correlated) with Douglas Dynamics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Douglas Dynamics has no effect on the direction of Gentex i.e., Gentex and Douglas Dynamics go up and down completely randomly.

Pair Corralation between Gentex and Douglas Dynamics

Given the investment horizon of 90 days Gentex is expected to under-perform the Douglas Dynamics. But the stock apears to be less risky and, when comparing its historical volatility, Gentex is 1.73 times less risky than Douglas Dynamics. The stock trades about -0.21 of its potential returns per unit of risk. The Douglas Dynamics is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  2,400  in Douglas Dynamics on February 5, 2024 and sell it today you would lose (46.00) from holding Douglas Dynamics or give up 1.92% of portfolio value over 90 days.

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

Gentex  vs.  Douglas Dynamics

Gentex

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gentex are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Gentex is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Douglas Dynamics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Douglas Dynamics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Douglas Dynamics is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Gentex and Douglas Dynamics

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

The idea behind Gentex and Douglas Dynamics 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.