Correlation Between GM and DDD
Can any of the company-specific risk be diversified away by investing in both GM and DDD 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 DDD into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and DDD, you can compare the effects of market volatilities on GM and DDD 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 DDD. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and DDD.
Diversification Opportunities for GM and DDD
Pay attention - limited upside
The 3 months correlation between GM and DDD is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and DDD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DDD 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 DDD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DDD has no effect on the direction of GM i.e., GM and DDD go up and down completely randomly.
Pair Corralation between GM and DDD
If you would invest 4,863 in General Motors on August 24, 2024 and sell it today you would earn a total of 705.00 from holding General Motors or generate 14.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 1.56% |
| Values | Daily Returns |
General Motors vs. DDD
Performance |
| Timeline |
| General Motors |
| DDD |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
GM and DDD Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and DDD
The main advantage of trading using opposite GM and DDD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, DDD 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 DDD will offset losses from the drop in DDD's long position.The idea behind General Motors and DDD 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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