Can any of the company-specific risk be diversified away by investing in both Genuine Parts and Evgo 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 Genuine Parts and Evgo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Genuine Parts Co and Evgo Inc, you can compare the effects of market volatilities on Genuine Parts and Evgo 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 Genuine Parts with a short position of Evgo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Genuine Parts and Evgo.
Diversification Opportunities for Genuine Parts and Evgo
The 3 months correlation between Genuine and Evgo is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Genuine Parts Co and Evgo Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evgo Inc and Genuine Parts 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 Genuine Parts Co are associated (or correlated) with Evgo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evgo Inc has no effect on the direction of Genuine Parts i.e., Genuine Parts and Evgo go up and down completely randomly.
Considering the 90-day investment horizon Genuine Parts Co is expected to generate 0.37 times more return on investment than Evgo. However, Genuine Parts Co is 2.69 times less risky than Evgo. It trades about -0.03 of its potential returns per unit of risk. Evgo Inc is currently generating about -0.12 per unit of risk. If you would invest 14,983 in Genuine Parts Co on March 6, 2024 and sell it today you would lose (572.00) from holding Genuine Parts Co or give up 3.82% of portfolio value over 90 days.
Over the last 90 days Genuine Parts Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Genuine Parts is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.
Over the last 90 days Evgo Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in July 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.