Correlation Between Gentex and Thor Industries

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Can any of the company-specific risk be diversified away by investing in both Gentex and Thor 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 Gentex and Thor Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gentex and Thor Industries, you can compare the effects of market volatilities on Gentex and Thor 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 Gentex with a short position of Thor Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gentex and Thor Industries.

Diversification Opportunities for Gentex and Thor Industries

0.04
  Correlation Coefficient

Significant diversification

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

Pair Corralation between Gentex and Thor Industries

Given the investment horizon of 90 days Gentex is expected to generate 1.58 times less return on investment than Thor Industries. But when comparing it to its historical volatility, Gentex is 1.67 times less risky than Thor Industries. It trades about 0.04 of its potential returns per unit of risk. Thor Industries is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  7,954  in Thor Industries on December 30, 2023 and sell it today you would earn a total of  3,780  from holding Thor Industries or generate 47.52% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Gentex  vs.  Thor Industries

 Performance 
       Timeline  
Gentex 

Risk-Adjusted Performance

11 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Gentex are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Gentex may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Thor Industries 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Thor Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, Thor Industries is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Gentex and Thor Industries Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Gentex and Thor Industries

The main advantage of trading using opposite Gentex and Thor Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gentex position performs unexpectedly, Thor 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 Thor Industries will offset losses from the drop in Thor Industries' long position.
The idea behind Gentex and Thor 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

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