Correlation Between Gentherm and Ford
Can any of the company-specific risk be diversified away by investing in both Gentherm and Ford 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 Gentherm and Ford into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gentherm and Ford Motor, you can compare the effects of market volatilities on Gentherm and Ford 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 Gentherm with a short position of Ford. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gentherm and Ford.
Diversification Opportunities for Gentherm and Ford
Good diversification
The 3 months correlation between Gentherm and Ford is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Gentherm and Ford Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ford Motor and Gentherm 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 Gentherm are associated (or correlated) with Ford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ford Motor has no effect on the direction of Gentherm i.e., Gentherm and Ford go up and down completely randomly.
Pair Corralation between Gentherm and Ford
Given the investment horizon of 90 days Gentherm is expected to under-perform the Ford. But the stock apears to be less risky and, when comparing its historical volatility, Gentherm is 1.19 times less risky than Ford. The stock trades about -0.16 of its potential returns per unit of risk. The Ford Motor is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,022 in Ford Motor on September 5, 2024 and sell it today you would earn a total of 52.00 from holding Ford Motor or generate 5.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gentherm vs. Ford Motor
Performance |
| Timeline |
| Gentherm |
| Ford Motor |
Gentherm and Ford Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gentherm and Ford
The main advantage of trading using opposite Gentherm and Ford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gentherm position performs unexpectedly, Ford 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 Ford will offset losses from the drop in Ford's long position.| Gentherm vs. Ford Motor | Gentherm vs. General Motors | Gentherm vs. Goodyear Tire Rubber | Gentherm vs. Li Auto |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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