Correlation Between Gentherm and Gentex

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

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

Diversification Opportunities for Gentherm and Gentex

0.81

Correlation Coefficient

Gentherm  Gentex

Very poor diversification

The 3 months correlation between Gentherm and Gentex is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Gentherm and Gentex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gentex and Gentherm 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 Gentherm are associated (or correlated) with Gentex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gentex has no effect on the direction of Gentherm i.e., Gentherm and Gentex go up and down completely randomly.

Pair Corralation between Gentherm and Gentex

Given the investment horizon of 90 days Gentherm is expected to under-perform the Gentex. In addition to that, Gentherm is 1.6 times more volatile than Gentex. It trades about -0.17 of its total potential returns per unit of risk. Gentex is currently generating about -0.21 per unit of volatility. If you would invest  3,591  in Gentex on February 5, 2024 and sell it today you would lose (178.00) from holding Gentex or give up 4.96% of portfolio value over 90 days.

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

Gentherm  vs.  Gentex

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 fragile basic indicators, Gentherm may actually be approaching a critical reversion point that can send shares even higher in June 2024.

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.

Pair Trading with Gentherm and Gentex

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

The idea behind Gentherm and Gentex 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.