Correlation Between Gentex and Carbon Revolution

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

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

Diversification Opportunities for Gentex and Carbon Revolution

-0.46

Correlation Coefficient

Gentex  Carbon Revolution

Very good diversification

The 3 months correlation between Gentex and Carbon is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Gentex and Carbon Revolution Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carbon Revolution Public and Gentex 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 Gentex are associated (or correlated) with Carbon Revolution. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carbon Revolution Public has no effect on the direction of Gentex i.e., Gentex and Carbon Revolution go up and down completely randomly.

Pair Corralation between Gentex and Carbon Revolution

Given the investment horizon of 90 days Gentex is expected to generate 0.11 times more return on investment than Carbon Revolution. However, Gentex is 8.8 times less risky than Carbon Revolution. It trades about -0.01 of its potential returns per unit of risk. Carbon Revolution Public is currently generating about 0.0 per unit of risk. If you would invest  3,042  in Gentex on October 3, 2024 and sell it today you would lose (169.00) from holding Gentex or give up 5.56% of portfolio value over 90 days.

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

Gentex  vs.  Carbon Revolution Public

Gentex

Risk-Adjusted Performance

0 of 100

Very Weak

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

Carbon Revolution Public

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Carbon Revolution Public are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Carbon Revolution showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gentex and Carbon Revolution

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

The idea behind Gentex and Carbon Revolution Public 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.