Correlation Between GM and Masterwork Machinery
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By analyzing existing cross correlation between General Motors and Masterwork Machinery, you can compare the effects of market volatilities on GM and Masterwork Machinery 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 Masterwork Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Masterwork Machinery.
Diversification Opportunities for GM and Masterwork Machinery
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between GM and Masterwork is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Masterwork Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Masterwork Machinery 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 Masterwork Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Masterwork Machinery has no effect on the direction of GM i.e., GM and Masterwork Machinery go up and down completely randomly.
Pair Corralation between GM and Masterwork Machinery
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.53 times more return on investment than Masterwork Machinery. However, General Motors is 1.88 times less risky than Masterwork Machinery. It trades about 0.07 of its potential returns per unit of risk. Masterwork Machinery is currently generating about 0.01 per unit of risk. If you would invest 3,503 in General Motors on November 9, 2024 and sell it today you would earn a total of 1,290 from holding General Motors or generate 36.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 94.76% |
| Values | Daily Returns |
General Motors vs. Masterwork Machinery
Performance |
| Timeline |
| General Motors |
| Masterwork Machinery |
Risk-Adjusted Performance
Very Weak
Weak | Strong |
GM and Masterwork Machinery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Masterwork Machinery
The main advantage of trading using opposite GM and Masterwork Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Masterwork Machinery 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 Masterwork Machinery will offset losses from the drop in Masterwork Machinery's long position.The idea behind General Motors and Masterwork Machinery 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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