Correlation Between Lear and Gentex

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

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

Diversification Opportunities for Lear and Gentex

-0.06

Correlation Coefficient

Lear  Gentex

Good diversification

The 3 months correlation between Lear and Gentex is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Lear Corp. and Gentex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gentex and Lear 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 Lear Corporation are associated (or correlated) with Gentex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gentex has no effect on the direction of Lear i.e., Lear and Gentex go up and down completely randomly.

Pair Corralation between Lear and Gentex

Considering the 90-day investment horizon Lear Corporation is expected to under-perform the Gentex. In addition to that, Lear is 1.33 times more volatile than Gentex. It trades about -0.11 of its total potential returns per unit of risk. Gentex is currently generating about 0.01 per unit of volatility. If you would invest  3,042  in Gentex on August 31, 2024 and sell it today you would earn a total of  15.00  from holding Gentex or generate 0.49% return on investment over 90 days.

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

Lear Corp.  vs.  Gentex

Lear

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lear Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Gentex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gentex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Gentex is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lear and Gentex

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

The idea behind Lear Corporation and Gentex 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.