Correlation Between Gentex and Almacenes Xito

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

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

Diversification Opportunities for Gentex and Almacenes Xito

0.06

Correlation Coefficient

Gentex  Almacenes Xito

Significant diversification

The 3 months correlation between Gentex and Almacenes is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Gentex and Almacenes xito SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Almacenes xito SA 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 Almacenes Xito. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Almacenes xito SA has no effect on the direction of Gentex i.e., Gentex and Almacenes Xito go up and down completely randomly.

Pair Corralation between Gentex and Almacenes Xito

Given the investment horizon of 90 days Gentex is expected to generate 0.31 times more return on investment than Almacenes Xito. However, Gentex is 3.18 times less risky than Almacenes Xito. It trades about -0.18 of its potential returns per unit of risk. Almacenes xito SA is currently generating about -0.08 per unit of risk. If you would invest  3,068  in Gentex on October 7, 2024 and sell it today you would lose (264.00) from holding Gentex or give up 8.6% of portfolio value over 90 days.

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

Gentex  vs.  Almacenes xito SA

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 newest stock price disturbance, may contribute to short-term losses for the investors.

Almacenes xito SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Almacenes xito SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Gentex and Almacenes Xito

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

The idea behind Gentex and Almacenes xito SA 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.