Correlation Between Genuine Parts and Steven Madden

Can any of the company-specific risk be diversified away by investing in both Genuine Parts and Steven Madden 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 Steven Madden 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 Steven Madden, you can compare the effects of market volatilities on Genuine Parts and Steven Madden 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 Steven Madden. Check out your portfolio center. Please also check ongoing floating volatility patterns of Genuine Parts and Steven Madden.

Diversification Opportunities for Genuine Parts and Steven Madden

-0.68

Correlation Coefficient

Genuine Parts  Steven Madden

Excellent diversification

The 3 months correlation between Genuine and Steven is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Genuine Parts Co and Steven Madden in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steven Madden 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 Steven Madden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steven Madden has no effect on the direction of Genuine Parts i.e., Genuine Parts and Steven Madden go up and down completely randomly.

Pair Corralation between Genuine Parts and Steven Madden

Considering the 90-day investment horizon Genuine Parts Co is expected to generate 0.55 times more return on investment than Steven Madden. However, Genuine Parts Co is 1.81 times less risky than Steven Madden. It trades about 0.04 of its potential returns per unit of risk. Steven Madden is currently generating about -0.27 per unit of risk. If you would invest  11,487  in Genuine Parts Co on December 28, 2024 and sell it today you would earn a total of  360.00  from holding Genuine Parts Co or generate 3.13% return on investment over 90 days.

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

Genuine Parts Co  vs.  Steven Madden

Genuine Parts

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Genuine Parts Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Steven Madden

Risk-Adjusted Performance

Very Weak

Over the last 90 days Steven Madden has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak 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 Genuine Parts and Steven Madden

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

The idea behind Genuine Parts Co and Steven Madden 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.