Correlation Between Genuine Parts and Big 5
Can any of the company-specific risk be diversified away by investing in both Genuine Parts and Big 5 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 Genuine Parts and Big 5 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Genuine Parts Co and Big 5 Sporting, you can compare the effects of market volatilities on Genuine Parts and Big 5 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 Genuine Parts with a short position of Big 5. Check out your portfolio center. Please also check ongoing floating volatility patterns of Genuine Parts and Big 5.
Diversification Opportunities for Genuine Parts and Big 5
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Genuine and Big is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Genuine Parts Co and Big 5 Sporting in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big 5 Sporting and Genuine Parts 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 Genuine Parts Co are associated (or correlated) with Big 5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big 5 Sporting has no effect on the direction of Genuine Parts i.e., Genuine Parts and Big 5 go up and down completely randomly.
Pair Corralation between Genuine Parts and Big 5
Considering the 90-day investment horizon Genuine Parts Co is expected to generate 0.46 times more return on investment than Big 5. However, Genuine Parts Co is 2.19 times less risky than Big 5. It trades about 0.14 of its potential returns per unit of risk. Big 5 Sporting is currently generating about -0.14 per unit of risk. If you would invest 11,624 in Genuine Parts Co on August 24, 2024 and sell it today you would earn a total of 645.00 from holding Genuine Parts Co or generate 5.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Genuine Parts Co vs. Big 5 Sporting
Performance |
| Timeline |
| Genuine Parts |
| Big 5 Sporting |
Genuine Parts and Big 5 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Genuine Parts and Big 5
The main advantage of trading using opposite Genuine Parts and Big 5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Genuine Parts position performs unexpectedly, Big 5 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 Big 5 will offset losses from the drop in Big 5's long position.| Genuine Parts vs. Dover | Genuine Parts vs. Cincinnati Financial | Genuine Parts vs. Leggett Platt Incorporated | Genuine Parts vs. WW Grainger |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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