Correlation Between Gentherm and Dana

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

By analyzing existing cross correlation between Gentherm and Dana Inc, you can compare the effects of market volatilities on Gentherm and Dana 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 Dana. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gentherm and Dana.

Diversification Opportunities for Gentherm and Dana

-0.55

Correlation Coefficient

Gentherm  Dana

Excellent diversification

The 3 months correlation between Gentherm and Dana is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Gentherm and Dana Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dana Inc 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 Dana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dana Inc has no effect on the direction of Gentherm i.e., Gentherm and Dana go up and down completely randomly.

Pair Corralation between Gentherm and Dana

Given the investment horizon of 90 days Gentherm is expected to under-perform the Dana. But the stock apears to be less risky and, when comparing its historical volatility, Gentherm is 1.13 times less risky than Dana. The stock trades about -0.04 of its potential returns per unit of risk. The Dana Inc is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,762  in Dana Inc on October 23, 2024 and sell it today you would lose (433.50) from holding Dana Inc or give up 24.6% of portfolio value over 90 days.

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

Gentherm  vs.  Dana Inc

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 very healthy basic indicators, Gentherm is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Dana Inc

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dana Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Dana displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gentherm and Dana

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

The idea behind Gentherm and Dana Inc 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.