Correlation Between Depo Auto and Gordon Auto

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

By analyzing existing cross correlation between Depo Auto Parts and Gordon Auto Body, you can compare the effects of market volatilities on Depo Auto and Gordon Auto 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 Depo Auto with a short position of Gordon Auto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Depo Auto and Gordon Auto.

Diversification Opportunities for Depo Auto and Gordon Auto

-0.54

Correlation Coefficient

Depo Auto  Gordon Auto

Excellent diversification

The 3 months correlation between Depo and Gordon is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Depo Auto Parts and Gordon Auto Body in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gordon Auto Body and Depo Auto 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 Depo Auto Parts are associated (or correlated) with Gordon Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gordon Auto Body has no effect on the direction of Depo Auto i.e., Depo Auto and Gordon Auto go up and down completely randomly.

Pair Corralation between Depo Auto and Gordon Auto

Assuming the 90 days trading horizon Depo Auto Parts is expected to under-perform the Gordon Auto. But the stock apears to be less risky and, when comparing its historical volatility, Depo Auto Parts is 1.29 times less risky than Gordon Auto. The stock trades about -0.15 of its potential returns per unit of risk. The Gordon Auto Body is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,565  in Gordon Auto Body on September 27, 2024 and sell it today you would earn a total of  300.00  from holding Gordon Auto Body or generate 8.42% return on investment over 90 days.

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

Depo Auto Parts  vs.  Gordon Auto Body

Depo Auto Parts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Depo Auto Parts has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Gordon Auto Body

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gordon Auto Body are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Gordon Auto may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Depo Auto and Gordon Auto

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

The idea behind Depo Auto Parts and Gordon Auto Body 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.