Correlation Between GM and Bank7 Corp
Can any of the company-specific risk be diversified away by investing in both GM and Bank7 Corp 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 Bank7 Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Bank7 Corp, you can compare the effects of market volatilities on GM and Bank7 Corp 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 Bank7 Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Bank7 Corp.
Diversification Opportunities for GM and Bank7 Corp
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between GM and Bank7 is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Bank7 Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank7 Corp 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 Bank7 Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank7 Corp has no effect on the direction of GM i.e., GM and Bank7 Corp go up and down completely randomly.
Pair Corralation between GM and Bank7 Corp
Allowing for the 90-day total investment horizon GM is expected to generate 1.56 times less return on investment than Bank7 Corp. But when comparing it to its historical volatility, General Motors is 1.07 times less risky than Bank7 Corp. It trades about 0.05 of its potential returns per unit of risk. Bank7 Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,532 in Bank7 Corp on August 24, 2024 and sell it today you would earn a total of 2,245 from holding Bank7 Corp or generate 88.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Bank7 Corp
Performance |
| Timeline |
| General Motors |
| Bank7 Corp |
GM and Bank7 Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Bank7 Corp
The main advantage of trading using opposite GM and Bank7 Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Bank7 Corp 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 Bank7 Corp will offset losses from the drop in Bank7 Corp's long position.The idea behind General Motors and Bank7 Corp 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.| Bank7 Corp vs. Home Federal Bancorp | Bank7 Corp vs. First Financial Northwest | Bank7 Corp vs. First Northwest Bancorp | Bank7 Corp vs. First 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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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