Correlation Between Gentex and Reservoir Media

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

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

Diversification Opportunities for Gentex and Reservoir Media

0.43

Correlation Coefficient

Gentex  Reservoir Media

Very weak diversification

The 3 months correlation between Gentex and Reservoir is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Gentex and Reservoir Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reservoir Media 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 Reservoir Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reservoir Media has no effect on the direction of Gentex i.e., Gentex and Reservoir Media go up and down completely randomly.

Pair Corralation between Gentex and Reservoir Media

Given the investment horizon of 90 days Gentex is expected to generate 0.32 times more return on investment than Reservoir Media. However, Gentex is 3.14 times less risky than Reservoir Media. It trades about -0.53 of its potential returns per unit of risk. Reservoir Media is currently generating about -0.19 per unit of risk. If you would invest  3,068  in Gentex on October 10, 2024 and sell it today you would lose (298.00) from holding Gentex or give up 9.71% of portfolio value over 90 days.

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

Gentex  vs.  Reservoir Media

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.

Reservoir Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reservoir Media has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Reservoir Media is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Gentex and Reservoir Media

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

The idea behind Gentex and Reservoir Media 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.