Correlation Between Astec Industries and Gencor Industries

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

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

Diversification Opportunities for Astec Industries and Gencor Industries

-0.34

Correlation Coefficient

Astec Industries  Gencor Industries

Very good diversification

The 3 months correlation between Astec and Gencor is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Astec Industries and Gencor Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gencor Industries and Astec Industries 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 Astec Industries are associated (or correlated) with Gencor Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gencor Industries has no effect on the direction of Astec Industries i.e., Astec Industries and Gencor Industries go up and down completely randomly.

Pair Corralation between Astec Industries and Gencor Industries

Given the investment horizon of 90 days Astec Industries is expected to under-perform the Gencor Industries. But the stock apears to be less risky and, when comparing its historical volatility, Astec Industries is 1.89 times less risky than Gencor Industries. The stock trades about -0.01 of its potential returns per unit of risk. The Gencor Industries is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,215  in Gencor Industries on December 28, 2024 and sell it today you would earn a total of  41.00  from holding Gencor Industries or generate 3.37% return on investment over 90 days.

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

Astec Industries  vs.  Gencor Industries

Astec Industries

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Astec Industries are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Astec Industries may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Gencor Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gencor Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Astec Industries and Gencor Industries

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

The idea behind Astec Industries and Gencor Industries 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.