Correlation Between Vestas Wind and Generac Holdings

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

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

Diversification Opportunities for Vestas Wind and Generac Holdings

-0.94

Correlation Coefficient

Vestas Wind  Generac Holdings

Pay attention - limited upside

The 3 months correlation between Vestas and Generac is -0.94. Overlapping area represents the amount of risk that can be diversified away by holding Vestas Wind Systems and Generac Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Generac Holdings and Vestas Wind 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 Vestas Wind Systems are associated (or correlated) with Generac Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Generac Holdings has no effect on the direction of Vestas Wind i.e., Vestas Wind and Generac Holdings go up and down completely randomly.

Pair Corralation between Vestas Wind and Generac Holdings

Assuming the 90 days horizon Vestas Wind Systems is expected to under-perform the Generac Holdings. But the pink sheet apears to be less risky and, when comparing its historical volatility, Vestas Wind Systems is 1.09 times less risky than Generac Holdings. The pink sheet trades about -0.06 of its potential returns per unit of risk. The Generac Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  11,677  in Generac Holdings on August 31, 2024 and sell it today you would earn a total of  7,143  from holding Generac Holdings or generate 61.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	99.73%
Values	Daily Returns

Vestas Wind Systems  vs.  Generac Holdings

Vestas Wind Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vestas Wind Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Generac Holdings

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Generac Holdings are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Generac Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vestas Wind and Generac Holdings

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

The idea behind Vestas Wind Systems and Generac Holdings 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.