Correlation Between GM and 1606 Corp
Can any of the company-specific risk be diversified away by investing in both GM and 1606 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 1606 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 1606 Corp, you can compare the effects of market volatilities on GM and 1606 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 1606 Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and 1606 Corp.
Diversification Opportunities for GM and 1606 Corp
Excellent diversification
The 3 months correlation between GM and 1606 is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and 1606 Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 1606 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 1606 Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 1606 Corp has no effect on the direction of GM i.e., GM and 1606 Corp go up and down completely randomly.
Pair Corralation between GM and 1606 Corp
Allowing for the 90-day total investment horizon GM is expected to generate 3.85 times less return on investment than 1606 Corp. But when comparing it to its historical volatility, General Motors is 6.32 times less risky than 1606 Corp. It trades about 0.07 of its potential returns per unit of risk. 1606 Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1.40 in 1606 Corp on August 28, 2024 and sell it today you would lose (0.20) from holding 1606 Corp or give up 14.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. 1606 Corp
Performance |
| Timeline |
| General Motors |
| 1606 Corp |
GM and 1606 Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and 1606 Corp
The main advantage of trading using opposite GM and 1606 Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, 1606 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 1606 Corp will offset losses from the drop in 1606 Corp's long position.The idea behind General Motors and 1606 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.| 1606 Corp vs. Doubledown Interactive Co | 1606 Corp vs. Wicket Gaming AB | 1606 Corp vs. NetEase | 1606 Corp vs. Chemours 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 Transaction History module to view history of all your transactions and understand their impact on performance.
Other Complementary Tools
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas |