Correlation Between GM and CogState
Can any of the company-specific risk be diversified away by investing in both GM and CogState 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 CogState into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and CogState, you can compare the effects of market volatilities on GM and CogState 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 CogState. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and CogState.
Diversification Opportunities for GM and CogState
Modest diversification
The 3 months correlation between GM and CogState is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and CogState in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CogState 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 CogState. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CogState has no effect on the direction of GM i.e., GM and CogState go up and down completely randomly.
Pair Corralation between GM and CogState
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the CogState. In addition to that, GM is 1.09 times more volatile than CogState. It trades about -0.15 of its total potential returns per unit of risk. CogState is currently generating about 0.34 per unit of volatility. If you would invest 97.00 in CogState on September 12, 2024 and sell it today you would earn a total of 18.00 from holding CogState or generate 18.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
General Motors vs. CogState
Performance |
| Timeline |
| General Motors |
| CogState |
GM and CogState Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and CogState
The main advantage of trading using opposite GM and CogState positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, CogState 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 CogState will offset losses from the drop in CogState's long position.The idea behind General Motors and CogState 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.| CogState vs. BSP Financial Group | CogState vs. MA Financial Group | CogState vs. Finexia Financial Group | CogState vs. My Foodie Box |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
Other Complementary Tools
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments |