Correlation Between Autoliv and Gentherm

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

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

Diversification Opportunities for Autoliv and Gentherm

0.25

Correlation Coefficient

Autoliv  Gentherm

Modest diversification

The 3 months correlation between Autoliv and Gentherm is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Autoliv and Gentherm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gentherm and Autoliv 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 Autoliv are associated (or correlated) with Gentherm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gentherm has no effect on the direction of Autoliv i.e., Autoliv and Gentherm go up and down completely randomly.

Pair Corralation between Autoliv and Gentherm

Considering the 90-day investment horizon Autoliv is expected to generate 0.8 times more return on investment than Gentherm. However, Autoliv is 1.26 times less risky than Gentherm. It trades about -0.07 of its potential returns per unit of risk. Gentherm is currently generating about -0.35 per unit of risk. If you would invest  10,187  in Autoliv on November 28, 2024 and sell it today you would lose (335.50) from holding Autoliv or give up 3.29% of portfolio value over 90 days.

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

Autoliv  vs.  Gentherm

Autoliv

Risk-Adjusted Performance

Weak

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

Gentherm

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gentherm has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Autoliv and Gentherm

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

The idea behind Autoliv and Gentherm 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.

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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 Anywhere module to track or share privately all of your investments from the convenience of any device.