Correlation Between Gentherm and Lear

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

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

Diversification Opportunities for Gentherm and Lear

0.33

Correlation Coefficient

Gentherm  Lear

Weak diversification

The 3 months correlation between Gentherm and Lear is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Gentherm and Lear Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lear 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 Lear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lear has no effect on the direction of Gentherm i.e., Gentherm and Lear go up and down completely randomly.

Pair Corralation between Gentherm and Lear

Given the investment horizon of 90 days Gentherm is expected to generate 0.91 times more return on investment than Lear. However, Gentherm is 1.1 times less risky than Lear. It trades about 0.31 of its potential returns per unit of risk. Lear Corporation is currently generating about 0.05 per unit of risk. If you would invest  3,832  in Gentherm on October 23, 2024 and sell it today you would earn a total of  244.00  from holding Gentherm or generate 6.37% return on investment over 90 days.

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

Gentherm  vs.  Lear Corp.

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.

Lear

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lear Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile 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.

Pair Trading with Gentherm and Lear

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

The idea behind Gentherm and Lear Corporation 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.