Correlation Between GM and Bird Construction
Can any of the company-specific risk be diversified away by investing in both GM and Bird Construction 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 Bird Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Bird Construction, you can compare the effects of market volatilities on GM and Bird Construction 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 Bird Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Bird Construction.
Diversification Opportunities for GM and Bird Construction
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GM and Bird is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Bird Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bird Construction 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 Bird Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bird Construction has no effect on the direction of GM i.e., GM and Bird Construction go up and down completely randomly.
Pair Corralation between GM and Bird Construction
Allowing for the 90-day total investment horizon GM is expected to generate 3.49 times less return on investment than Bird Construction. But when comparing it to its historical volatility, General Motors is 1.42 times less risky than Bird Construction. It trades about 0.05 of its potential returns per unit of risk. Bird Construction is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 536.00 in Bird Construction on August 30, 2024 and sell it today you would earn a total of 1,632 from holding Bird Construction or generate 304.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 91.92% |
| Values | Daily Returns |
General Motors vs. Bird Construction
Performance |
| Timeline |
| General Motors |
| Bird Construction |
GM and Bird Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Bird Construction
The main advantage of trading using opposite GM and Bird Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Bird Construction 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 Bird Construction will offset losses from the drop in Bird Construction's long position.The idea behind General Motors and Bird 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.| Bird Construction vs. MYR Group | Bird Construction vs. Limbach Holdings | Bird Construction vs. Bowman Consulting Group | Bird Construction vs. Matrix Service 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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