Correlation Between Nidec and Generac Holdings

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

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

Diversification Opportunities for Nidec and Generac Holdings

-0.33

Correlation Coefficient

Nidec  Generac Holdings

Very good diversification

The 3 months correlation between Nidec and Generac is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Nidec and Generac Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Generac Holdings and Nidec 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 Nidec 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 Nidec i.e., Nidec and Generac Holdings go up and down completely randomly.

Pair Corralation between Nidec and Generac Holdings

If you would invest  1,360  in Nidec on September 30, 2024 and sell it today you would earn a total of  0.00  from holding Nidec or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Nidec  vs.  Generac Holdings

Nidec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nidec has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Nidec is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the 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 Nidec and Generac Holdings

The main advantage of trading using opposite Nidec and Generac Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nidec 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 Nidec 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 Global Correlations module to find global opportunities by holding instruments from different markets.