Correlation Between Douglas Dynamics and Gentherm

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

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

Diversification Opportunities for Douglas Dynamics and Gentherm

0.24

Correlation Coefficient

Douglas Dynamics  Gentherm

Modest diversification

The 3 months correlation between Douglas and Gentherm is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Douglas Dynamics and Gentherm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gentherm and Douglas Dynamics 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 Douglas Dynamics are associated (or correlated) with Gentherm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gentherm has no effect on the direction of Douglas Dynamics i.e., Douglas Dynamics and Gentherm go up and down completely randomly.

Pair Corralation between Douglas Dynamics and Gentherm

Given the investment horizon of 90 days Douglas Dynamics is expected to generate 1.08 times more return on investment than Gentherm. However, Douglas Dynamics is 1.08 times more volatile than Gentherm. It trades about -0.04 of its potential returns per unit of risk. Gentherm is currently generating about -0.17 per unit of risk. 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

Douglas Dynamics  vs.  Gentherm

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.

Gentherm

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gentherm are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Gentherm may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Douglas Dynamics and Gentherm

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

The idea behind Douglas Dynamics and Gentherm 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.