Correlation Between Generac Holdings and Cummins
Can any of the company-specific risk be diversified away by investing in both Generac Holdings and Cummins 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 Generac Holdings and Cummins into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Generac Holdings and Cummins, you can compare the effects of market volatilities on Generac Holdings and Cummins 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 Generac Holdings with a short position of Cummins. Check out your portfolio center. Please also check ongoing floating volatility patterns of Generac Holdings and Cummins.
Diversification Opportunities for Generac Holdings and Cummins
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Generac and Cummins is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Generac Holdings and Cummins in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cummins and Generac Holdings 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 Generac Holdings are associated (or correlated) with Cummins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cummins has no effect on the direction of Generac Holdings i.e., Generac Holdings and Cummins go up and down completely randomly.
Pair Corralation between Generac Holdings and Cummins
Given the investment horizon of 90 days Generac Holdings is expected to generate 1.4 times more return on investment than Cummins. However, Generac Holdings is 1.4 times more volatile than Cummins. It trades about 0.14 of its potential returns per unit of risk. Cummins is currently generating about 0.12 per unit of risk. If you would invest 11,251 in Generac Holdings on August 27, 2024 and sell it today you would earn a total of 7,657 from holding Generac Holdings or generate 68.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Generac Holdings vs. Cummins
Performance |
| Timeline |
| Generac Holdings |
| Cummins |
Generac Holdings and Cummins Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Generac Holdings and Cummins
The main advantage of trading using opposite Generac Holdings and Cummins positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Generac Holdings position performs unexpectedly, Cummins 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 Cummins will offset losses from the drop in Cummins' long position.| Generac Holdings vs. Graco Inc | Generac Holdings vs. Franklin Electric Co | Generac Holdings vs. Flowserve | Generac Holdings vs. Donaldson |
Check out your portfolio center.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 Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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