Correlation Between Gentex and Software Acquisition

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

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

Diversification Opportunities for Gentex and Software Acquisition

0.78

Correlation Coefficient

Gentex  Software Acquisition

Poor diversification

The 3 months correlation between Gentex and Software is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Gentex and Software Acquisition Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Software Acquisition 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 Software Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Software Acquisition has no effect on the direction of Gentex i.e., Gentex and Software Acquisition go up and down completely randomly.

Pair Corralation between Gentex and Software Acquisition

Given the investment horizon of 90 days Gentex is expected to generate 0.36 times more return on investment than Software Acquisition. However, Gentex is 2.77 times less risky than Software Acquisition. It trades about -0.15 of its potential returns per unit of risk. Software Acquisition Group is currently generating about -0.13 per unit of risk. If you would invest  3,116  in Gentex on October 26, 2024 and sell it today you would lose (319.00) from holding Gentex or give up 10.24% of portfolio value over 90 days.

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

Gentex  vs.  Software Acquisition 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 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.

Software Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Software Acquisition Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Gentex and Software Acquisition

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

The idea behind Gentex and Software Acquisition 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.