Correlation Between Gentherm and Adient PLC

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

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

Diversification Opportunities for Gentherm and Adient PLC

0.84

Correlation Coefficient

Gentherm  Adient PLC

Very poor diversification

The 3 months correlation between Gentherm and Adient is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Gentherm and Adient PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adient PLC and Gentherm 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 Gentherm are associated (or correlated) with Adient PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adient PLC has no effect on the direction of Gentherm i.e., Gentherm and Adient PLC go up and down completely randomly.

Pair Corralation between Gentherm and Adient PLC

Given the investment horizon of 90 days Gentherm is expected to under-perform the Adient PLC. But the stock apears to be less risky and, when comparing its historical volatility, Gentherm is 1.39 times less risky than Adient PLC. The stock trades about -0.26 of its potential returns per unit of risk. The Adient PLC is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  1,719  in Adient PLC on December 29, 2024 and sell it today you would lose (438.00) from holding Adient PLC or give up 25.48% of portfolio value over 90 days.

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

Gentherm  vs.  Adient PLC

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.

Adient PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Adient PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Gentherm and Adient PLC

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

The idea behind Gentherm and Adient PLC 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.