Correlation Between Genuine Parts and Launch One

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

By analyzing existing cross correlation between Genuine Parts Co and Launch One Acquisition, you can compare the effects of market volatilities on Genuine Parts and Launch One 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 Genuine Parts with a short position of Launch One. Check out your portfolio center. Please also check ongoing floating volatility patterns of Genuine Parts and Launch One.

Diversification Opportunities for Genuine Parts and Launch One

-0.14

Correlation Coefficient

Genuine Parts  Launch One

Good diversification

The 3 months correlation between Genuine and Launch is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Genuine Parts Co and Launch One Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Launch One Acquisition and Genuine Parts 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 Genuine Parts Co are associated (or correlated) with Launch One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Launch One Acquisition has no effect on the direction of Genuine Parts i.e., Genuine Parts and Launch One go up and down completely randomly.

Pair Corralation between Genuine Parts and Launch One

Considering the 90-day investment horizon Genuine Parts is expected to generate 169.79 times less return on investment than Launch One. But when comparing it to its historical volatility, Genuine Parts Co is 21.36 times less risky than Launch One. It trades about 0.03 of its potential returns per unit of risk. Launch One Acquisition is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  9.00  in Launch One Acquisition on October 26, 2024 and sell it today you would earn a total of  5.46  from holding Launch One Acquisition or generate 60.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Genuine Parts Co  vs.  Launch One Acquisition

Genuine Parts

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Genuine Parts Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Genuine Parts is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Launch One Acquisition

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Launch One Acquisition are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Launch One showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Genuine Parts and Launch One

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

The idea behind Genuine Parts Co and Launch One Acquisition 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.