Correlation Between ODP Corp and Genuine Parts

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

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

Diversification Opportunities for ODP Corp and Genuine Parts

0.14

Correlation Coefficient

ODP Corp  Genuine Parts

Average diversification

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

Pair Corralation between ODP Corp and Genuine Parts

Considering the 90-day investment horizon ODP Corp is expected to under-perform the Genuine Parts. But the stock apears to be less risky and, when comparing its historical volatility, ODP Corp is 1.31 times less risky than Genuine Parts. The stock trades about -0.09 of its potential returns per unit of risk. The Genuine Parts Co is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  14,215  in Genuine Parts Co on September 2, 2024 and sell it today you would lose (1,542) from holding Genuine Parts Co or give up 10.85% of portfolio value over 90 days.

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

ODP Corp  vs.  Genuine Parts Co

ODP Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ODP Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest conflicting performance, the Stock's fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Genuine Parts

Risk-Adjusted Performance

0 of 100

Very 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 latest unfluctuating performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with ODP Corp and Genuine Parts

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

The idea behind ODP Corp and Genuine Parts Co 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.