Correlation Between ECD Automotive and GM
Can any of the company-specific risk be diversified away by investing in both ECD Automotive and GM 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 ECD Automotive and GM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ECD Automotive Design and General Motors, you can compare the effects of market volatilities on ECD Automotive and GM 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 ECD Automotive with a short position of GM. Check out your portfolio center. Please also check ongoing floating volatility patterns of ECD Automotive and GM.
Diversification Opportunities for ECD Automotive and GM
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between ECD and GM is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding ECD Automotive Design and General Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Motors and ECD Automotive 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 ECD Automotive Design are associated (or correlated) with GM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Motors has no effect on the direction of ECD Automotive i.e., ECD Automotive and GM go up and down completely randomly.
Pair Corralation between ECD Automotive and GM
Given the investment horizon of 90 days ECD Automotive is expected to generate 132.08 times less return on investment than GM. In addition to that, ECD Automotive is 2.44 times more volatile than General Motors. It trades about 0.0 of its total potential returns per unit of risk. General Motors is currently generating about 0.08 per unit of volatility. If you would invest 4,483 in General Motors on September 3, 2024 and sell it today you would earn a total of 1,076 from holding General Motors or generate 24.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ECD Automotive Design vs. General Motors
Performance |
| Timeline |
| ECD Automotive Design |
| General Motors |
ECD Automotive and GM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ECD Automotive and GM
The main advantage of trading using opposite ECD Automotive and GM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ECD Automotive position performs unexpectedly, GM 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 GM will offset losses from the drop in GM's long position.| ECD Automotive vs. GreenPower Motor | ECD Automotive vs. ZEEKR Intelligent Technology | ECD Automotive vs. Volcon Inc | ECD Automotive vs. Ford Motor |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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