Correlation Between AGCO and Gencor Industries

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

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

Diversification Opportunities for AGCO and Gencor Industries

0.04

Correlation Coefficient

AGCO  Gencor Industries

Significant diversification

The 3 months correlation between AGCO and Gencor is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding AGCO Corp. and Gencor Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gencor Industries and AGCO 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 AGCO Corporation are associated (or correlated) with Gencor Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gencor Industries has no effect on the direction of AGCO i.e., AGCO and Gencor Industries go up and down completely randomly.

Pair Corralation between AGCO and Gencor Industries

Given the investment horizon of 90 days AGCO Corporation is expected to under-perform the Gencor Industries. But the stock apears to be less risky and, when comparing its historical volatility, AGCO Corporation is 1.01 times less risky than Gencor Industries. The stock trades about -0.01 of its potential returns per unit of risk. The Gencor Industries is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,616  in Gencor Industries on January 24, 2024 and sell it today you would earn a total of  75.00  from holding Gencor Industries or generate 4.64% return on investment over 90 days.

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

AGCO Corp.  vs.  Gencor Industries

AGCO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AGCO Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, AGCO is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Gencor Industries

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gencor Industries are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, Gencor Industries may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with AGCO and Gencor Industries

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

The idea behind AGCO Corporation and Gencor Industries 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.

Check out your portfolio center.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.