Correlation Between Gencor Industries and Komatsu

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

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

Diversification Opportunities for Gencor Industries and Komatsu

0.23

Correlation Coefficient

Gencor Industries  Komatsu

Modest diversification

The 3 months correlation between Gencor and Komatsu is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Gencor Industries and Komatsu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Komatsu and Gencor 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 Gencor Industries are associated (or correlated) with Komatsu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Komatsu has no effect on the direction of Gencor Industries i.e., Gencor Industries and Komatsu go up and down completely randomly.

Pair Corralation between Gencor Industries and Komatsu

Given the investment horizon of 90 days Gencor Industries is expected to under-perform the Komatsu. But the stock apears to be less risky and, when comparing its historical volatility, Gencor Industries is 1.17 times less risky than Komatsu. The stock trades about -0.35 of its potential returns per unit of risk. The Komatsu is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,742  in Komatsu on October 4, 2024 and sell it today you would lose (27.00) from holding Komatsu or give up 0.98% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Gencor Industries  vs.  Komatsu

Gencor Industries

Risk-Adjusted Performance

0 of 100

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 unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Komatsu

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Gencor Industries and Komatsu

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

The idea behind Gencor Industries and Komatsu 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..