Correlation Between Standard and Garrett Motion
Can any of the company-specific risk be diversified away by investing in both Standard and Garrett Motion 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 Standard and Garrett Motion into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Standard Motor Products and Garrett Motion, you can compare the effects of market volatilities on Standard and Garrett Motion 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 Standard with a short position of Garrett Motion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Standard and Garrett Motion.
Diversification Opportunities for Standard and Garrett Motion
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Standard and Garrett is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Standard Motor Products and Garrett Motion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Garrett Motion and Standard 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 Standard Motor Products are associated (or correlated) with Garrett Motion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Garrett Motion has no effect on the direction of Standard i.e., Standard and Garrett Motion go up and down completely randomly.
Pair Corralation between Standard and Garrett Motion
Considering the 90-day investment horizon Standard is expected to generate 8.63 times less return on investment than Garrett Motion. In addition to that, Standard is 1.06 times more volatile than Garrett Motion. It trades about 0.0 of its total potential returns per unit of risk. Garrett Motion is currently generating about 0.03 per unit of volatility. If you would invest 740.00 in Garrett Motion on August 26, 2024 and sell it today you would earn a total of 91.00 from holding Garrett Motion or generate 12.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Standard Motor Products vs. Garrett Motion
Performance |
| Timeline |
| Standard Motor Products |
| Garrett Motion |
Standard and Garrett Motion Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Standard and Garrett Motion
The main advantage of trading using opposite Standard and Garrett Motion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Standard position performs unexpectedly, Garrett Motion 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 Garrett Motion will offset losses from the drop in Garrett Motion's long position.| Standard vs. Dorman Products | Standard vs. Motorcar Parts of | Standard vs. Douglas Dynamics | Standard vs. Stoneridge |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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