Correlation Between Gordon Auto and YCC Parts

Can any of the company-specific risk be diversified away by investing in both Gordon Auto and YCC Parts 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 Gordon Auto and YCC Parts into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gordon Auto Body and YCC Parts MFG, you can compare the effects of market volatilities on Gordon Auto and YCC Parts 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 Gordon Auto with a short position of YCC Parts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gordon Auto and YCC Parts.

Diversification Opportunities for Gordon Auto and YCC Parts

-0.49

Correlation Coefficient

Gordon Auto  YCC Parts

Very good diversification

The 3 months correlation between Gordon and YCC is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Gordon Auto Body and YCC Parts MFG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YCC Parts MFG and Gordon Auto 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 Gordon Auto Body are associated (or correlated) with YCC Parts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YCC Parts MFG has no effect on the direction of Gordon Auto i.e., Gordon Auto and YCC Parts go up and down completely randomly.

Pair Corralation between Gordon Auto and YCC Parts

Assuming the 90 days trading horizon Gordon Auto Body is expected to generate 1.18 times more return on investment than YCC Parts. However, Gordon Auto is 1.18 times more volatile than YCC Parts MFG. It trades about 0.05 of its potential returns per unit of risk. YCC Parts MFG is currently generating about 0.04 per unit of risk. If you would invest  2,540  in Gordon Auto Body on September 5, 2024 and sell it today you would earn a total of  1,325  from holding Gordon Auto Body or generate 52.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Gordon Auto Body  vs.  YCC Parts MFG

Gordon Auto Body

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gordon Auto Body are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Gordon Auto showed solid returns over the last few months and may actually be approaching a breakup point.

YCC Parts MFG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days YCC Parts MFG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, YCC Parts is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Gordon Auto and YCC Parts

The main advantage of trading using opposite Gordon Auto and YCC Parts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gordon Auto position performs unexpectedly, YCC Parts 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 YCC Parts will offset losses from the drop in YCC Parts' long position.

The idea behind Gordon Auto Body and YCC Parts MFG 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.