Correlation Between Gentherm and Standard

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

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

Diversification Opportunities for Gentherm and Standard

0.65

Correlation Coefficient

Gentherm  Standard

Poor diversification

The 3 months correlation between Gentherm and Standard is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Gentherm and Standard Motor Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Standard Motor Products 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 Standard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Standard Motor Products has no effect on the direction of Gentherm i.e., Gentherm and Standard go up and down completely randomly.

Pair Corralation between Gentherm and Standard

Given the investment horizon of 90 days Gentherm is expected to under-perform the Standard. In addition to that, Gentherm is 1.39 times more volatile than Standard Motor Products. It trades about -0.19 of its total potential returns per unit of risk. Standard Motor Products is currently generating about -0.09 per unit of volatility. If you would invest  3,255  in Standard Motor Products on November 28, 2024 and sell it today you would lose (246.50) from holding Standard Motor Products or give up 7.57% of portfolio value over 90 days.

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

Gentherm  vs.  Standard Motor Products

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 March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Standard Motor Products

Risk-Adjusted Performance

Very Weak

Over the last 90 days Standard Motor Products has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's primary indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Gentherm and Standard

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

The idea behind Gentherm and Standard Motor Products 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.

Check out your portfolio center.

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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..