Correlation Between GM and Thor Industries
Can any of the company-specific risk be diversified away by investing in both GM 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 GM and Thor Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Thor Industries, you can compare the effects of market volatilities on GM 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 GM with a short position of Thor Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Thor Industries.
Diversification Opportunities for GM and Thor Industries
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between GM and Thor is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Thor Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thor Industries and GM 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 General Motors 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 GM i.e., GM and Thor Industries go up and down completely randomly.
Pair Corralation between GM and Thor Industries
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.77 times more return on investment than Thor Industries. However, General Motors is 1.29 times less risky than Thor Industries. It trades about 0.07 of its potential returns per unit of risk. Thor Industries is currently generating about 0.04 per unit of risk. If you would invest 3,274 in General Motors on September 19, 2024 and sell it today you would earn a total of 1,841 from holding General Motors or generate 56.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 89.29% |
| Values | Daily Returns |
General Motors vs. Thor Industries
Performance |
| Timeline |
| General Motors |
| Thor Industries |
GM and Thor Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Thor Industries
The main advantage of trading using opposite GM and Thor Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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 General Motors 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.| Thor Industries vs. L3Harris Technologies | Thor Industries vs. Worldwide Healthcare Trust | Thor Industries vs. Bellevue Healthcare Trust | Thor Industries vs. HCA Healthcare |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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