Correlation Between Genuine Parts and Global Fashion
Can any of the company-specific risk be diversified away by investing in both Genuine Parts and Global Fashion 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 Global Fashion into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Genuine Parts and Global Fashion Group, you can compare the effects of market volatilities on Genuine Parts and Global Fashion 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 Global Fashion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Genuine Parts and Global Fashion.
Diversification Opportunities for Genuine Parts and Global Fashion
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Genuine and Global is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Genuine Parts and Global Fashion Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Fashion Group 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 are associated (or correlated) with Global Fashion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Fashion Group has no effect on the direction of Genuine Parts i.e., Genuine Parts and Global Fashion go up and down completely randomly.
Pair Corralation between Genuine Parts and Global Fashion
Assuming the 90 days horizon Genuine Parts is expected to generate 0.22 times more return on investment than Global Fashion. However, Genuine Parts is 4.51 times less risky than Global Fashion. It trades about -0.02 of its potential returns per unit of risk. Global Fashion Group is currently generating about -0.01 per unit of risk. If you would invest 16,000 in Genuine Parts on August 31, 2024 and sell it today you would lose (4,020) from holding Genuine Parts or give up 25.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Genuine Parts vs. Global Fashion Group
Performance |
| Timeline |
| Genuine Parts |
| Global Fashion Group |
Genuine Parts and Global Fashion Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Genuine Parts and Global Fashion
The main advantage of trading using opposite Genuine Parts and Global Fashion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Genuine Parts position performs unexpectedly, Global Fashion 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 Global Fashion will offset losses from the drop in Global Fashion's long position.| Genuine Parts vs. MercadoLibre | Genuine Parts vs. AutoZone | Genuine Parts vs. Superior Plus Corp | Genuine Parts vs. NMI Holdings |
| Global Fashion vs. AGRICULTBK HADR25 YC | Global Fashion vs. Dairy Farm International | Global Fashion vs. GRIFFIN MINING LTD | Global Fashion vs. Sterling Construction |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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