Correlation Between Fanuc and Generac Holdings

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

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

Diversification Opportunities for Fanuc and Generac Holdings

-0.12

Correlation Coefficient

Fanuc  Generac Holdings

Good diversification

The 3 months correlation between Fanuc and Generac is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Fanuc and Generac Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Generac Holdings and Fanuc 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 Fanuc 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 Fanuc i.e., Fanuc and Generac Holdings go up and down completely randomly.

Pair Corralation between Fanuc and Generac Holdings

Assuming the 90 days horizon Fanuc is expected to under-perform the Generac Holdings. But the pink sheet apears to be less risky and, when comparing its historical volatility, Fanuc is 1.07 times less risky than Generac Holdings. The pink sheet trades about -0.01 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  13,730  in Generac Holdings on September 30, 2024 and sell it today you would earn a total of  1,837  from holding Generac Holdings or generate 13.38% return on investment over 90 days.

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

Fanuc  vs.  Generac Holdings

Fanuc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fanuc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Generac Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Generac Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Generac Holdings is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Fanuc and Generac Holdings

The main advantage of trading using opposite Fanuc and Generac Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fanuc 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 Fanuc 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 Commodity Directory module to find actively traded commodities issued by global exchanges.