Correlation Between PACCAR and Gentex
Can any of the company-specific risk be diversified away by investing in both PACCAR and Gentex 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 PACCAR and Gentex into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PACCAR Inc and Gentex, you can compare the effects of market volatilities on PACCAR and Gentex 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 PACCAR with a short position of Gentex. Check out your portfolio center. Please also check ongoing floating volatility patterns of PACCAR and Gentex.
Diversification Opportunities for PACCAR and Gentex
Significant diversification
The 3 months correlation between PACCAR and Gentex is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding PACCAR Inc and Gentex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gentex and PACCAR 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 PACCAR Inc are associated (or correlated) with Gentex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gentex has no effect on the direction of PACCAR i.e., PACCAR and Gentex go up and down completely randomly.
Pair Corralation between PACCAR and Gentex
Given the investment horizon of 90 days PACCAR Inc is expected to generate 1.75 times more return on investment than Gentex. However, PACCAR is 1.75 times more volatile than Gentex. It trades about 0.19 of its potential returns per unit of risk. Gentex is currently generating about -0.02 per unit of risk. If you would invest 10,680 in PACCAR Inc on August 27, 2024 and sell it today you would earn a total of 974.00 from holding PACCAR Inc or generate 9.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PACCAR Inc vs. Gentex
Performance |
| Timeline |
| PACCAR Inc |
| Gentex |
PACCAR and Gentex Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PACCAR and Gentex
The main advantage of trading using opposite PACCAR and Gentex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PACCAR position performs unexpectedly, Gentex 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 Gentex will offset losses from the drop in Gentex's long position.The idea behind PACCAR Inc and Gentex 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
Other Complementary Tools
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA |