Correlation Between Terex and Gencor Industries

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

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

Diversification Opportunities for Terex and Gencor Industries

0.7

Correlation Coefficient

Terex  Gencor Industries

Poor diversification

The 3 months correlation between Terex and Gencor is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Terex and Gencor Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gencor Industries and Terex 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 Terex are associated (or correlated) with Gencor Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gencor Industries has no effect on the direction of Terex i.e., Terex and Gencor Industries go up and down completely randomly.

Pair Corralation between Terex and Gencor Industries

Considering the 90-day investment horizon Terex is expected to generate 0.81 times more return on investment than Gencor Industries. However, Terex is 1.24 times less risky than Gencor Industries. It trades about -0.07 of its potential returns per unit of risk. Gencor Industries is currently generating about -0.15 per unit of risk. If you would invest  4,502  in Terex on December 28, 2024 and sell it today you would lose (494.00) from holding Terex or give up 10.97% of portfolio value over 90 days.

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

Terex  vs.  Gencor Industries

Terex

Risk-Adjusted Performance

Very Weak

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

Gencor Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gencor Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Terex and Gencor Industries

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

The idea behind Terex and Gencor Industries 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.