Correlation Between GM and ReaLy Development
Can any of the company-specific risk be diversified away by investing in both GM and ReaLy Development 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 ReaLy Development into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and ReaLy Development Construction, you can compare the effects of market volatilities on GM and ReaLy Development 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 ReaLy Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and ReaLy Development.
Diversification Opportunities for GM and ReaLy Development
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between GM and ReaLy is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and ReaLy Development Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ReaLy Development 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 ReaLy Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ReaLy Development has no effect on the direction of GM i.e., GM and ReaLy Development go up and down completely randomly.
Pair Corralation between GM and ReaLy Development
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.75 times more return on investment than ReaLy Development. However, General Motors is 1.33 times less risky than ReaLy Development. It trades about 0.08 of its potential returns per unit of risk. ReaLy Development Construction is currently generating about 0.04 per unit of risk. If you would invest 4,411 in General Motors on September 3, 2024 and sell it today you would earn a total of 1,148 from holding General Motors or generate 26.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.4% |
| Values | Daily Returns |
General Motors vs. ReaLy Development Construction
Performance |
| Timeline |
| General Motors |
| ReaLy Development |
GM and ReaLy Development Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and ReaLy Development
The main advantage of trading using opposite GM and ReaLy Development positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, ReaLy Development 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 ReaLy Development will offset losses from the drop in ReaLy Development's long position.The idea behind General Motors and ReaLy Development Construction 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.| ReaLy Development vs. Run Long Construction | ReaLy Development vs. Chong Hong Construction | ReaLy Development vs. JSL Construction Development | ReaLy Development vs. Delpha Construction Co |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope |