Correlation Between Genuine Parts and RH
Can any of the company-specific risk be diversified away by investing in both Genuine Parts and RH 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 RH 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 RH, you can compare the effects of market volatilities on Genuine Parts and RH 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 RH. Check out your portfolio center. Please also check ongoing floating volatility patterns of Genuine Parts and RH.
Diversification Opportunities for Genuine Parts and RH
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Genuine and RH is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Genuine Parts Co and RH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RH 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 RH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RH has no effect on the direction of Genuine Parts i.e., Genuine Parts and RH go up and down completely randomly.
Pair Corralation between Genuine Parts and RH
Considering the 90-day investment horizon Genuine Parts is expected to generate 1.4 times less return on investment than RH. But when comparing it to its historical volatility, Genuine Parts Co is 1.37 times less risky than RH. It trades about 0.24 of its potential returns per unit of risk. RH is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 32,569 in RH on August 26, 2024 and sell it today you would earn a total of 4,232 from holding RH or generate 12.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Genuine Parts Co vs. RH
Performance |
| Timeline |
| Genuine Parts |
| RH |
Genuine Parts and RH Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Genuine Parts and RH
The main advantage of trading using opposite Genuine Parts and RH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Genuine Parts position performs unexpectedly, RH 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 RH will offset losses from the drop in RH's long position.| Genuine Parts vs. Steven Madden | Genuine Parts vs. Vera Bradley | Genuine Parts vs. Caleres | Genuine Parts vs. Rocky Brands |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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