Correlation Between GM and Arweave
Can any of the company-specific risk be diversified away by investing in both GM and Arweave 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 Arweave into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Arweave, you can compare the effects of market volatilities on GM and Arweave 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 Arweave. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Arweave.
Diversification Opportunities for GM and Arweave
Very good diversification
The 3 months correlation between GM and Arweave is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Arweave in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arweave 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 Arweave. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arweave has no effect on the direction of GM i.e., GM and Arweave go up and down completely randomly.
Pair Corralation between GM and Arweave
Allowing for the 90-day total investment horizon GM is expected to generate 5.26 times less return on investment than Arweave. But when comparing it to its historical volatility, General Motors is 2.47 times less risky than Arweave. It trades about 0.12 of its potential returns per unit of risk. Arweave is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 1,535 in Arweave on August 31, 2024 and sell it today you would earn a total of 620.00 from holding Arweave or generate 40.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Arweave
Performance |
| Timeline |
| General Motors |
| Arweave |
GM and Arweave Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Arweave
The main advantage of trading using opposite GM and Arweave positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Arweave 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 Arweave will offset losses from the drop in Arweave's long position.The idea behind General Motors and Arweave 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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