Correlation Between Gentex and Gentherm

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

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

Diversification Opportunities for Gentex and Gentherm

0.88

Correlation Coefficient

Gentex  Gentherm

Very poor diversification

The 3 months correlation between Gentex and Gentherm is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Gentex and Gentherm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gentherm 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 Gentherm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gentherm has no effect on the direction of Gentex i.e., Gentex and Gentherm go up and down completely randomly.

Pair Corralation between Gentex and Gentherm

Given the investment horizon of 90 days Gentex is expected to generate 0.82 times more return on investment than Gentherm. However, Gentex is 1.22 times less risky than Gentherm. It trades about -0.17 of its potential returns per unit of risk. Gentherm is currently generating about -0.26 per unit of risk. If you would invest  2,848  in Gentex on December 29, 2024 and sell it today you would lose (508.00) from holding Gentex or give up 17.84% of portfolio value over 90 days.

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

Gentex  vs.  Gentherm

Gentex

Risk-Adjusted Performance

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 uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Gentherm

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Gentex and Gentherm

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

The idea behind Gentex and Gentherm 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.