Correlation Between Commercial Vehicle and Gentherm

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

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

Diversification Opportunities for Commercial Vehicle and Gentherm

0.85

Correlation Coefficient

Commercial Vehicle  Gentherm

Very poor diversification

The 3 months correlation between Commercial and Gentherm is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Commercial Vehicle Group and Gentherm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gentherm and Commercial Vehicle 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 Commercial Vehicle Group 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 Commercial Vehicle i.e., Commercial Vehicle and Gentherm go up and down completely randomly.

Pair Corralation between Commercial Vehicle and Gentherm

Given the investment horizon of 90 days Commercial Vehicle Group is expected to generate 2.68 times more return on investment than Gentherm. However, Commercial Vehicle is 2.68 times more volatile than Gentherm. It trades about 0.23 of its potential returns per unit of risk. Gentherm is currently generating about 0.17 per unit of risk. If you would invest  90.00  in Commercial Vehicle Group on May 6, 2025 and sell it today you would earn a total of  95.00  from holding Commercial Vehicle Group or generate 105.56% return on investment over 90 days.

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

Commercial Vehicle Group  vs.  Gentherm

Commercial Vehicle

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Commercial Vehicle Group are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting technical and fundamental indicators, Commercial Vehicle demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Gentherm

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gentherm are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Gentherm displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Commercial Vehicle and Gentherm

The main advantage of trading using opposite Commercial Vehicle and Gentherm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commercial Vehicle 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 Commercial Vehicle Group 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.

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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.