Correlation Between Gentherm and Stoneridge

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

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

Diversification Opportunities for Gentherm and Stoneridge

0.44

Correlation Coefficient

Gentherm  Stoneridge

Very weak diversification

The 3 months correlation between Gentherm and Stoneridge is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Gentherm and Stoneridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stoneridge 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 Stoneridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stoneridge has no effect on the direction of Gentherm i.e., Gentherm and Stoneridge go up and down completely randomly.

Pair Corralation between Gentherm and Stoneridge

Given the investment horizon of 90 days Gentherm is expected to under-perform the Stoneridge. But the stock apears to be less risky and, when comparing its historical volatility, Gentherm is 2.43 times less risky than Stoneridge. The stock trades about -0.25 of its potential returns per unit of risk. The Stoneridge is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  629.00  in Stoneridge on December 30, 2024 and sell it today you would lose (166.00) from holding Stoneridge or give up 26.39% of portfolio value over 90 days.

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

Gentherm  vs.  Stoneridge

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.

Stoneridge

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stoneridge has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Gentherm and Stoneridge

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

The idea behind Gentherm and Stoneridge 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.