Correlation Between GrafTech International and Garrett Motion

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

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

Diversification Opportunities for GrafTech International and Garrett Motion

-0.03

Correlation Coefficient

GrafTech International  Garrett Motion

Good diversification

The 3 months correlation between GrafTech and Garrett is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding GrafTech International and Garrett Motion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Garrett Motion and GrafTech International 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 GrafTech International 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 GrafTech International i.e., GrafTech International and Garrett Motion go up and down completely randomly.

Pair Corralation between GrafTech International and Garrett Motion

Considering the 90-day investment horizon GrafTech International is expected to under-perform the Garrett Motion. In addition to that, GrafTech International is 2.71 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 0.1 per unit of volatility. If you would invest  800.00  in Garrett Motion on October 6, 2024 and sell it today you would earn a total of  96.00  from holding Garrett Motion or generate 12.0% return on investment over 90 days.

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

GrafTech International  vs.  Garrett Motion

GrafTech International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GrafTech International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, GrafTech International is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Garrett Motion

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Garrett Motion are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Garrett Motion showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GrafTech International and Garrett Motion

The main advantage of trading using opposite GrafTech International and Garrett Motion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GrafTech International 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.

The idea behind GrafTech International and Garrett Motion 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.