Correlation Between Gentex and Autoliv
Can any of the company-specific risk be diversified away by investing in both Gentex and Autoliv 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 Autoliv into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gentex and Autoliv, you can compare the effects of market volatilities on Gentex and Autoliv 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 Autoliv. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gentex and Autoliv.
Diversification Opportunities for Gentex and Autoliv
Very weak diversification
The 3 months correlation between Gentex and Autoliv is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Gentex and Autoliv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autoliv 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 Autoliv. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Autoliv has no effect on the direction of Gentex i.e., Gentex and Autoliv go up and down completely randomly.
Pair Corralation between Gentex and Autoliv
Given the investment horizon of 90 days Gentex is expected to generate 0.74 times more return on investment than Autoliv. However, Gentex is 1.35 times less risky than Autoliv. It trades about 0.01 of its potential returns per unit of risk. Autoliv is currently generating about 0.0 per unit of risk. If you would invest 3,041 in Gentex on August 27, 2024 and sell it today you would lose (1.00) from holding Gentex or give up 0.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gentex vs. Autoliv
Performance |
| Timeline |
| Gentex |
| Autoliv |
Gentex and Autoliv Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gentex and Autoliv
The main advantage of trading using opposite Gentex and Autoliv positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gentex position performs unexpectedly, Autoliv 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 Autoliv will offset losses from the drop in Autoliv's long position.The idea behind Gentex and Autoliv 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.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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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