Correlation Between GM and Fortune Electric
Can any of the company-specific risk be diversified away by investing in both GM and Fortune Electric 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 Fortune Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Fortune Electric Co, you can compare the effects of market volatilities on GM and Fortune Electric 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 Fortune Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Fortune Electric.
Diversification Opportunities for GM and Fortune Electric
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between GM and Fortune is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Fortune Electric Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortune Electric 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 Fortune Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortune Electric has no effect on the direction of GM i.e., GM and Fortune Electric go up and down completely randomly.
Pair Corralation between GM and Fortune Electric
Allowing for the 90-day total investment horizon GM is expected to generate 10.29 times less return on investment than Fortune Electric. But when comparing it to its historical volatility, General Motors is 2.02 times less risky than Fortune Electric. It trades about 0.03 of its potential returns per unit of risk. Fortune Electric Co is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 5,287 in Fortune Electric Co on November 5, 2024 and sell it today you would earn a total of 51,513 from holding Fortune Electric Co or generate 974.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 97.17% |
| Values | Daily Returns |
General Motors vs. Fortune Electric Co
Performance |
| Timeline |
| General Motors |
| Fortune Electric |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
GM and Fortune Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Fortune Electric
The main advantage of trading using opposite GM and Fortune Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Fortune Electric 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 Fortune Electric will offset losses from the drop in Fortune Electric's long position.The idea behind General Motors and Fortune Electric Co 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
Other Complementary Tools
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum |