Correlation Between GM and Castellum
Can any of the company-specific risk be diversified away by investing in both GM and Castellum 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 Castellum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Castellum, you can compare the effects of market volatilities on GM and Castellum 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 Castellum. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Castellum.
Diversification Opportunities for GM and Castellum
Good diversification
The 3 months correlation between GM and Castellum is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Castellum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Castellum 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 Castellum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Castellum has no effect on the direction of GM i.e., GM and Castellum go up and down completely randomly.
Pair Corralation between GM and Castellum
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.29 times more return on investment than Castellum. However, General Motors is 3.44 times less risky than Castellum. It trades about 0.05 of its potential returns per unit of risk. Castellum is currently generating about -0.03 per unit of risk. If you would invest 4,057 in General Motors on August 27, 2024 and sell it today you would earn a total of 1,796 from holding General Motors or generate 44.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Castellum
Performance |
| Timeline |
| General Motors |
| Castellum |
GM and Castellum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Castellum
The main advantage of trading using opposite GM and Castellum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Castellum 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 Castellum will offset losses from the drop in Castellum's long position.The idea behind General Motors and Castellum 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.| Castellum vs. Flint Telecom Group | Castellum vs. Datametrex AI Limited | Castellum vs. TTEC Holdings | Castellum vs. Digatrade Financial Corp |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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