Correlation Between Garmin and Global Partners

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

By analyzing existing cross correlation between Garmin and Global Partners LP, you can compare the effects of market volatilities on Garmin and Global Partners 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 Garmin with a short position of Global Partners. Check out your portfolio center. Please also check ongoing floating volatility patterns of Garmin and Global Partners.

Diversification Opportunities for Garmin and Global Partners

-0.31

Correlation Coefficient

Garmin  Global Partners

Very good diversification

The 3 months correlation between Garmin and Global is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Garmin and Global Partners LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Partners LP and Garmin 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 Garmin are associated (or correlated) with Global Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Partners LP has no effect on the direction of Garmin i.e., Garmin and Global Partners go up and down completely randomly.

Pair Corralation between Garmin and Global Partners

Given the investment horizon of 90 days Garmin is expected to generate 8.21 times more return on investment than Global Partners. However, Garmin is 8.21 times more volatile than Global Partners LP. It trades about 0.01 of its potential returns per unit of risk. Global Partners LP is currently generating about 0.01 per unit of risk. If you would invest  20,824  in Garmin on December 20, 2024 and sell it today you would earn a total of  53.00  from holding Garmin or generate 0.25% return on investment over 90 days.

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

Garmin  vs.  Global Partners LP

Garmin

Risk-Adjusted Performance

Very Weak

Over the last 90 days Garmin has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Garmin is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Global Partners LP

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global Partners LP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Global Partners is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Garmin and Global Partners

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

The idea behind Garmin and Global Partners LP 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.