Correlation Between Gentherm and Motorcar Parts

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

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

Diversification Opportunities for Gentherm and Motorcar Parts

0.16

Correlation Coefficient

Gentherm  Motorcar Parts

Average diversification

The 3 months correlation between Gentherm and Motorcar is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Gentherm and Motorcar Parts of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Motorcar Parts 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 Motorcar Parts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Motorcar Parts has no effect on the direction of Gentherm i.e., Gentherm and Motorcar Parts go up and down completely randomly.

Pair Corralation between Gentherm and Motorcar Parts

Given the investment horizon of 90 days Gentherm is expected to generate 0.45 times more return on investment than Motorcar Parts. However, Gentherm is 2.23 times less risky than Motorcar Parts. It trades about -0.17 of its potential returns per unit of risk. Motorcar Parts of is currently generating about -0.25 per unit of risk. If you would invest  5,472  in Gentherm on February 5, 2024 and sell it today you would lose (349.00) from holding Gentherm or give up 6.38% of portfolio value over 90 days.

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

Gentherm  vs.  Motorcar Parts of

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.

Motorcar Parts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Motorcar Parts of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Gentherm and Motorcar Parts

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

The idea behind Gentherm and Motorcar Parts of 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..