Correlation Between Stoneridge and Gentherm

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

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

Diversification Opportunities for Stoneridge and Gentherm

0.74

Correlation Coefficient

Stoneridge  Gentherm

Poor diversification

The 3 months correlation between Stoneridge and Gentherm is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Stoneridge and Gentherm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gentherm and Stoneridge 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 Stoneridge are associated (or correlated) with Gentherm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gentherm has no effect on the direction of Stoneridge i.e., Stoneridge and Gentherm go up and down completely randomly.

Pair Corralation between Stoneridge and Gentherm

Considering the 90-day investment horizon Stoneridge is expected to under-perform the Gentherm. In addition to that, Stoneridge is 2.21 times more volatile than Gentherm. It trades about -0.25 of its total potential returns per unit of risk. Gentherm is currently generating about -0.14 per unit of volatility. If you would invest  5,054  in Gentherm on August 30, 2024 and sell it today you would lose (843.00) from holding Gentherm or give up 16.68% of portfolio value over 90 days.

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

Stoneridge  vs.  Gentherm

Stoneridge

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stoneridge has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in December 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Gentherm

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gentherm has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Stoneridge and Gentherm

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

The idea behind Stoneridge and Gentherm 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.