Correlation Between Renault SA and Gentex

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

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

Diversification Opportunities for Renault SA and Gentex

-0.77

Correlation Coefficient

Renault SA  Gentex

Pay attention - limited upside

The 3 months correlation between Renault and Gentex is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Renault SA and Gentex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gentex and Renault SA 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 Renault SA are associated (or correlated) with Gentex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gentex has no effect on the direction of Renault SA i.e., Renault SA and Gentex go up and down completely randomly.

Pair Corralation between Renault SA and Gentex

Assuming the 90 days horizon Renault SA is expected to generate 0.73 times more return on investment than Gentex. However, Renault SA is 1.38 times less risky than Gentex. It trades about 0.11 of its potential returns per unit of risk. Gentex is currently generating about -0.17 per unit of risk. If you would invest  4,860  in Renault SA on October 25, 2024 and sell it today you would earn a total of  84.00  from holding Renault SA or generate 1.73% return on investment over 90 days.

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

Renault SA  vs.  Gentex

Renault SA

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Renault SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting fundamental indicators, Renault SA reported solid returns over the last few months and may actually be approaching a breakup point.

Gentex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gentex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Renault SA and Gentex

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

The idea behind Renault SA and Gentex 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.