Correlation Between Garmin and YHC

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

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

Diversification Opportunities for Garmin and YHC

0.72

Correlation Coefficient

Garmin  YHC

Poor diversification

The 3 months correlation between Garmin and YHC is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Garmin and YHC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YHC 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 YHC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YHC has no effect on the direction of Garmin i.e., Garmin and YHC go up and down completely randomly.

Pair Corralation between Garmin and YHC

Given the investment horizon of 90 days Garmin is expected to under-perform the YHC. But the stock apears to be less risky and, when comparing its historical volatility, Garmin is 11.41 times less risky than YHC. The stock trades about -0.22 of its potential returns per unit of risk. The YHC is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  109.00  in YHC on October 9, 2024 and sell it today you would earn a total of  67.00  from holding YHC or generate 61.47% return on investment over 90 days.

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

Garmin  vs.  YHC

Garmin

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Garmin are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain primary indicators, Garmin displayed solid returns over the last few months and may actually be approaching a breakup point.

YHC

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in YHC are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting technical indicators, YHC exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Garmin and YHC

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

The idea behind Garmin and YHC 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.