Correlation Between Motorcar Parts and Gentherm

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

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

Diversification Opportunities for Motorcar Parts and Gentherm

-0.82

Correlation Coefficient

Motorcar Parts  Gentherm

Pay attention - limited upside

The 3 months correlation between Motorcar and Gentherm is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Motorcar Parts of and Gentherm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gentherm and Motorcar 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 Motorcar Parts of 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 Motorcar Parts i.e., Motorcar Parts and Gentherm go up and down completely randomly.

Pair Corralation between Motorcar Parts and Gentherm

Given the investment horizon of 90 days Motorcar Parts of is expected to generate 2.3 times more return on investment than Gentherm. However, Motorcar Parts is 2.3 times more volatile than Gentherm. It trades about 0.08 of its potential returns per unit of risk. Gentherm is currently generating about -0.25 per unit of risk. If you would invest  785.00  in Motorcar Parts of on December 30, 2024 and sell it today you would earn a total of  150.00  from holding Motorcar Parts of or generate 19.11% return on investment over 90 days.

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

Motorcar Parts of  vs.  Gentherm

Motorcar Parts

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Motorcar Parts of are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Motorcar Parts sustained solid returns over the last few months and may actually be approaching a breakup point.

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 Motorcar Parts and Gentherm

The main advantage of trading using opposite Motorcar Parts and Gentherm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Motorcar Parts 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 Motorcar Parts of 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..