Correlation Between GM and Infortrend Technology
Can any of the company-specific risk be diversified away by investing in both GM and Infortrend Technology 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 Infortrend Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Infortrend Technology, you can compare the effects of market volatilities on GM and Infortrend Technology 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 Infortrend Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Infortrend Technology.
Diversification Opportunities for GM and Infortrend Technology
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GM and Infortrend is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Infortrend Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infortrend Technology 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 Infortrend Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Infortrend Technology has no effect on the direction of GM i.e., GM and Infortrend Technology go up and down completely randomly.
Pair Corralation between GM and Infortrend Technology
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.64 times more return on investment than Infortrend Technology. However, General Motors is 1.56 times less risky than Infortrend Technology. It trades about 0.26 of its potential returns per unit of risk. Infortrend Technology is currently generating about -0.05 per unit of risk. If you would invest 5,273 in General Motors on August 27, 2024 and sell it today you would earn a total of 580.00 from holding General Motors or generate 11.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Infortrend Technology
Performance |
| Timeline |
| General Motors |
| Infortrend Technology |
GM and Infortrend Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Infortrend Technology
The main advantage of trading using opposite GM and Infortrend Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Infortrend Technology 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 Infortrend Technology will offset losses from the drop in Infortrend Technology's long position.The idea behind General Motors and Infortrend Technology 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.| Infortrend Technology vs. Novatek Microelectronics Corp | Infortrend Technology vs. Quanta Computer | Infortrend Technology vs. United Microelectronics |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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