Correlation Between Douglas Dynamics and Gentex

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

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

Diversification Opportunities for Douglas Dynamics and Gentex

-0.22

Correlation Coefficient

Douglas Dynamics  Gentex

Very good diversification

The 3 months correlation between Douglas and Gentex is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Douglas Dynamics and Gentex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gentex and Douglas Dynamics 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 Douglas Dynamics are associated (or correlated) with Gentex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gentex has no effect on the direction of Douglas Dynamics i.e., Douglas Dynamics and Gentex go up and down completely randomly.

Pair Corralation between Douglas Dynamics and Gentex

Given the investment horizon of 90 days Douglas Dynamics is expected to under-perform the Gentex. In addition to that, Douglas Dynamics is 1.51 times more volatile than Gentex. It trades about -0.04 of its total potential returns per unit of risk. Gentex is currently generating about -0.01 per unit of volatility. If you would invest  3,120  in Gentex on August 30, 2024 and sell it today you would lose (63.00) from holding Gentex 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

Douglas Dynamics  vs.  Gentex

Douglas Dynamics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Douglas Dynamics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Douglas Dynamics is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Gentex

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Douglas Dynamics and Gentex

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

The idea behind Douglas Dynamics and Gentex 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.