Correlation Between GM and Calfrac Well
Can any of the company-specific risk be diversified away by investing in both GM and Calfrac Well 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 Calfrac Well into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Calfrac Well Services, you can compare the effects of market volatilities on GM and Calfrac Well 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 Calfrac Well. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Calfrac Well.
Diversification Opportunities for GM and Calfrac Well
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and Calfrac is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Calfrac Well Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calfrac Well Services 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 Calfrac Well. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calfrac Well Services has no effect on the direction of GM i.e., GM and Calfrac Well go up and down completely randomly.
Pair Corralation between GM and Calfrac Well
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.85 times more return on investment than Calfrac Well. However, General Motors is 1.18 times less risky than Calfrac Well. It trades about 0.11 of its potential returns per unit of risk. Calfrac Well Services is currently generating about -0.01 per unit of risk. If you would invest 3,324 in General Motors on September 2, 2024 and sell it today you would earn a total of 2,235 from holding General Motors or generate 67.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Calfrac Well Services
Performance |
| Timeline |
| General Motors |
| Calfrac Well Services |
GM and Calfrac Well Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Calfrac Well
The main advantage of trading using opposite GM and Calfrac Well positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Calfrac Well 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 Calfrac Well will offset losses from the drop in Calfrac Well's long position.The idea behind General Motors and Calfrac Well Services 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.| Calfrac Well vs. Petroleo Brasileiro Petrobras | Calfrac Well vs. Equinor ASA ADR | Calfrac Well vs. Eni SpA ADR | Calfrac Well vs. YPF Sociedad Anonima |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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