Correlation Between GM and Eclectic Bar
Can any of the company-specific risk be diversified away by investing in both GM and Eclectic Bar 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 Eclectic Bar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Eclectic Bar Group, you can compare the effects of market volatilities on GM and Eclectic Bar 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 Eclectic Bar. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Eclectic Bar.
Diversification Opportunities for GM and Eclectic Bar
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between GM and Eclectic is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Eclectic Bar Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eclectic Bar Group 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 Eclectic Bar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eclectic Bar Group has no effect on the direction of GM i.e., GM and Eclectic Bar go up and down completely randomly.
Pair Corralation between GM and Eclectic Bar
Allowing for the 90-day total investment horizon GM is expected to generate 2.2 times less return on investment than Eclectic Bar. But when comparing it to its historical volatility, General Motors is 3.37 times less risky than Eclectic Bar. It trades about 0.09 of its potential returns per unit of risk. Eclectic Bar Group is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,700 in Eclectic Bar Group on September 24, 2024 and sell it today you would earn a total of 2,000 from holding Eclectic Bar Group or generate 74.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.2% |
| Values | Daily Returns |
General Motors vs. Eclectic Bar Group
Performance |
| Timeline |
| General Motors |
| Eclectic Bar Group |
GM and Eclectic Bar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Eclectic Bar
The main advantage of trading using opposite GM and Eclectic Bar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Eclectic Bar 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 Eclectic Bar will offset losses from the drop in Eclectic Bar's long position.The idea behind General Motors and Eclectic Bar Group 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.| Eclectic Bar vs. Toyota Motor Corp | Eclectic Bar vs. SoftBank Group Corp | Eclectic Bar vs. OTP Bank Nyrt | Eclectic Bar vs. Newmont Corp |
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 Stocks Directory module to find actively traded stocks across global markets.
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