Correlation Between SecureTech Innovations and Gentherm

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

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

Diversification Opportunities for SecureTech Innovations and Gentherm

0.06

Correlation Coefficient

SecureTech Innovations  Gentherm

Significant diversification

The 3 months correlation between SecureTech and Gentherm is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding SecureTech Innovations and Gentherm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gentherm and SecureTech Innovations 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 SecureTech Innovations 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 SecureTech Innovations i.e., SecureTech Innovations and Gentherm go up and down completely randomly.

Pair Corralation between SecureTech Innovations and Gentherm

Given the investment horizon of 90 days SecureTech Innovations is expected to generate 17.68 times more return on investment than Gentherm. However, SecureTech Innovations is 17.68 times more volatile than Gentherm. It trades about 0.1 of its potential returns per unit of risk. Gentherm is currently generating about -0.07 per unit of risk. If you would invest  100.00  in SecureTech Innovations on October 10, 2024 and sell it today you would earn a total of  0.00  from holding SecureTech Innovations or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

SecureTech Innovations  vs.  Gentherm

SecureTech Innovations

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SecureTech Innovations are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, SecureTech Innovations demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Gentherm

Risk-Adjusted Performance

0 of 100

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 latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with SecureTech Innovations and Gentherm

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

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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.