Correlation Between GM and Catalyst Dynamic
Can any of the company-specific risk be diversified away by investing in both GM and Catalyst Dynamic 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 Catalyst Dynamic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Catalyst Dynamic Alpha, you can compare the effects of market volatilities on GM and Catalyst Dynamic 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 Catalyst Dynamic. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Catalyst Dynamic.
Diversification Opportunities for GM and Catalyst Dynamic
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Catalyst is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Catalyst Dynamic Alpha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalyst Dynamic Alpha 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 Catalyst Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalyst Dynamic Alpha has no effect on the direction of GM i.e., GM and Catalyst Dynamic go up and down completely randomly.
Pair Corralation between GM and Catalyst Dynamic
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.92 times more return on investment than Catalyst Dynamic. However, GM is 1.92 times more volatile than Catalyst Dynamic Alpha. It trades about 0.25 of its potential returns per unit of risk. Catalyst Dynamic Alpha is currently generating about 0.2 per unit of risk. If you would invest 5,272 in General Motors on August 25, 2024 and sell it today you would earn a total of 581.00 from holding General Motors or generate 11.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
General Motors vs. Catalyst Dynamic Alpha
Performance |
| Timeline |
| General Motors |
| Catalyst Dynamic Alpha |
GM and Catalyst Dynamic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Catalyst Dynamic
The main advantage of trading using opposite GM and Catalyst Dynamic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Catalyst Dynamic 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 Catalyst Dynamic will offset losses from the drop in Catalyst Dynamic's long position.The idea behind General Motors and Catalyst Dynamic Alpha 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.| Catalyst Dynamic vs. Catalyst Dynamic Alpha | Catalyst Dynamic vs. Nasdaq 100 Fund Class | Catalyst Dynamic vs. Catalyst Dynamic Alpha | Catalyst Dynamic vs. Nasdaq 100 Fund Class |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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