Correlation Between Gentex and Definitive Healthcare

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

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

Diversification Opportunities for Gentex and Definitive Healthcare

0.47

Correlation Coefficient

Gentex  Definitive Healthcare

Very weak diversification

The 3 months correlation between Gentex and Definitive is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Gentex and Definitive Healthcare Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Definitive Healthcare 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 Definitive Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Definitive Healthcare has no effect on the direction of Gentex i.e., Gentex and Definitive Healthcare go up and down completely randomly.

Pair Corralation between Gentex and Definitive Healthcare

Given the investment horizon of 90 days Gentex is expected to under-perform the Definitive Healthcare. But the stock apears to be less risky and, when comparing its historical volatility, Gentex is 2.53 times less risky than Definitive Healthcare. The stock trades about -0.14 of its potential returns per unit of risk. The Definitive Healthcare Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  416.00  in Definitive Healthcare Corp on October 25, 2024 and sell it today you would earn a total of  55.00  from holding Definitive Healthcare Corp or generate 13.22% return on investment over 90 days.

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

Gentex  vs.  Definitive Healthcare Corp

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 latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Definitive Healthcare

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Definitive Healthcare Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, Definitive Healthcare demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gentex and Definitive Healthcare

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

The idea behind Gentex and Definitive Healthcare Corp 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.