Correlation Between Gentex and Commercial Vehicle

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

By analyzing existing cross correlation between Gentex and Commercial Vehicle Group, you can compare the effects of market volatilities on Gentex and Commercial Vehicle 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 Commercial Vehicle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gentex and Commercial Vehicle.

Diversification Opportunities for Gentex and Commercial Vehicle

-0.13

Correlation Coefficient

Gentex  Commercial Vehicle

Good diversification

The 3 months correlation between Gentex and Commercial is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Gentex and Commercial Vehicle Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commercial Vehicle 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 Commercial Vehicle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commercial Vehicle has no effect on the direction of Gentex i.e., Gentex and Commercial Vehicle go up and down completely randomly.

Pair Corralation between Gentex and Commercial Vehicle

Given the investment horizon of 90 days Gentex is expected to generate 0.32 times more return on investment than Commercial Vehicle. However, Gentex is 3.17 times less risky than Commercial Vehicle. It trades about 0.01 of its potential returns per unit of risk. Commercial Vehicle Group is currently generating about -0.09 per unit of risk. If you would invest  3,042  in Gentex on September 1, 2024 and sell it today you would earn a total of  14.00  from holding Gentex or generate 0.46% return on investment over 90 days.

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

Gentex  vs.  Commercial Vehicle Group

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.

Commercial Vehicle

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Commercial Vehicle Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in December 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Gentex and Commercial Vehicle

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

The idea behind Gentex and Commercial Vehicle Group 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.