Correlation Between Generac Holdings and Fanuc

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

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

Diversification Opportunities for Generac Holdings and Fanuc

-0.03

Correlation Coefficient

Generac Holdings  Fanuc

Good diversification

The 3 months correlation between Generac and Fanuc is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Generac Holdings and Fanuc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fanuc and Generac Holdings 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 Generac Holdings are associated (or correlated) with Fanuc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fanuc has no effect on the direction of Generac Holdings i.e., Generac Holdings and Fanuc go up and down completely randomly.

Pair Corralation between Generac Holdings and Fanuc

Given the investment horizon of 90 days Generac Holdings is expected to generate 0.48 times more return on investment than Fanuc. However, Generac Holdings is 2.08 times less risky than Fanuc. It trades about 0.0 of its potential returns per unit of risk. Fanuc is currently generating about -0.03 per unit of risk. If you would invest  15,888  in Generac Holdings on September 30, 2024 and sell it today you would lose (321.00) from holding Generac Holdings or give up 2.02% of portfolio value over 90 days.

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

Generac Holdings  vs.  Fanuc

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.

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. Despite latest abnormal performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Generac Holdings and Fanuc

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

The idea behind Generac Holdings and Fanuc 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.