Correlation Between GM and Cyber Security
Can any of the company-specific risk be diversified away by investing in both GM and Cyber Security 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 Cyber Security into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Cyber Security 1, you can compare the effects of market volatilities on GM and Cyber Security 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 Cyber Security. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Cyber Security.
Diversification Opportunities for GM and Cyber Security
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and Cyber is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Cyber Security 1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cyber Security 1 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 Cyber Security. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cyber Security 1 has no effect on the direction of GM i.e., GM and Cyber Security go up and down completely randomly.
Pair Corralation between GM and Cyber Security
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Cyber Security. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 4.22 times less risky than Cyber Security. The stock trades about -0.12 of its potential returns per unit of risk. The Cyber Security 1 is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 0.70 in Cyber Security 1 on October 13, 2024 and sell it today you would earn a total of 0.14 from holding Cyber Security 1 or generate 20.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 84.21% |
| Values | Daily Returns |
General Motors vs. Cyber Security 1
Performance |
| Timeline |
| General Motors |
| Cyber Security 1 |
GM and Cyber Security Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Cyber Security
The main advantage of trading using opposite GM and Cyber Security positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Cyber Security 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 Cyber Security will offset losses from the drop in Cyber Security's long position.The idea behind General Motors and Cyber Security 1 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.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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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