Correlation Between GM and Gordon Auto
Can any of the company-specific risk be diversified away by investing in both GM and Gordon Auto 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 Gordon Auto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Gordon Auto Body, you can compare the effects of market volatilities on GM and Gordon Auto 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 Gordon Auto. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Gordon Auto.
Diversification Opportunities for GM and Gordon Auto
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Gordon is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Gordon Auto Body in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gordon Auto Body 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 Gordon Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gordon Auto Body has no effect on the direction of GM i.e., GM and Gordon Auto go up and down completely randomly.
Pair Corralation between GM and Gordon Auto
Allowing for the 90-day total investment horizon GM is expected to generate 1.35 times less return on investment than Gordon Auto. In addition to that, GM is 1.06 times more volatile than Gordon Auto Body. It trades about 0.12 of its total potential returns per unit of risk. Gordon Auto Body is currently generating about 0.17 per unit of volatility. If you would invest 3,505 in Gordon Auto Body on September 4, 2024 and sell it today you would earn a total of 330.00 from holding Gordon Auto Body or generate 9.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
General Motors vs. Gordon Auto Body
Performance |
| Timeline |
| General Motors |
| Gordon Auto Body |
GM and Gordon Auto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Gordon Auto
The main advantage of trading using opposite GM and Gordon Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Gordon Auto 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 Gordon Auto will offset losses from the drop in Gordon Auto's long position.The idea behind General Motors and Gordon Auto Body 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.| Gordon Auto vs. Kaulin Mfg | Gordon Auto vs. Tex Ray Industrial Co | Gordon Auto vs. De Licacy Industrial | Gordon Auto vs. Kwong Fong Industries |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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