Correlation Between GM and Billy Goat
Can any of the company-specific risk be diversified away by investing in both GM and Billy Goat 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 Billy Goat into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Billy Goat Brands, you can compare the effects of market volatilities on GM and Billy Goat 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 Billy Goat. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Billy Goat.
Diversification Opportunities for GM and Billy Goat
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Billy is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Billy Goat Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Billy Goat Brands 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 Billy Goat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Billy Goat Brands has no effect on the direction of GM i.e., GM and Billy Goat go up and down completely randomly.
Pair Corralation between GM and Billy Goat
Allowing for the 90-day total investment horizon GM is expected to generate 2.44 times less return on investment than Billy Goat. But when comparing it to its historical volatility, General Motors is 3.1 times less risky than Billy Goat. It trades about 0.16 of its potential returns per unit of risk. Billy Goat Brands is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 11.00 in Billy Goat Brands on September 2, 2024 and sell it today you would earn a total of 2.00 from holding Billy Goat Brands or generate 18.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Billy Goat Brands
Performance |
| Timeline |
| General Motors |
| Billy Goat Brands |
GM and Billy Goat Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Billy Goat
The main advantage of trading using opposite GM and Billy Goat positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Billy Goat 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 Billy Goat will offset losses from the drop in Billy Goat's long position.The idea behind General Motors and Billy Goat Brands 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.| Billy Goat vs. Blackhawk Growth Corp | Billy Goat vs. Guardian Capital Group | Billy Goat vs. Flow Capital Corp | Billy Goat vs. Princeton Capital |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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