Correlation Between GM and Da32 Life
Can any of the company-specific risk be diversified away by investing in both GM and Da32 Life 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 Da32 Life into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Da32 Life Science, you can compare the effects of market volatilities on GM and Da32 Life 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 Da32 Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Da32 Life.
Diversification Opportunities for GM and Da32 Life
Poor diversification
The 3 months correlation between GM and Da32 is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Da32 Life Science in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Da32 Life Science 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 Da32 Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Da32 Life Science has no effect on the direction of GM i.e., GM and Da32 Life go up and down completely randomly.
Pair Corralation between GM and Da32 Life
Allowing for the 90-day total investment horizon General Motors is expected to generate 6.06 times more return on investment than Da32 Life. However, GM is 6.06 times more volatile than Da32 Life Science. It trades about 0.05 of its potential returns per unit of risk. Da32 Life Science is currently generating about 0.08 per unit of risk. If you would invest 3,757 in General Motors on August 30, 2024 and sell it today you would earn a total of 1,793 from holding General Motors or generate 47.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 31.31% |
| Values | Daily Returns |
General Motors vs. Da32 Life Science
Performance |
| Timeline |
| General Motors |
| Da32 Life Science |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
GM and Da32 Life Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Da32 Life
The main advantage of trading using opposite GM and Da32 Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Da32 Life 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 Da32 Life will offset losses from the drop in Da32 Life's long position.The idea behind General Motors and Da32 Life Science 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
Other Complementary Tools
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets |