Correlation Between GM and DAWSON GEOPHYSICAL
Can any of the company-specific risk be diversified away by investing in both GM and DAWSON GEOPHYSICAL 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 DAWSON GEOPHYSICAL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and DAWSON GEOPHYSICAL, you can compare the effects of market volatilities on GM and DAWSON GEOPHYSICAL 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 DAWSON GEOPHYSICAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and DAWSON GEOPHYSICAL.
Diversification Opportunities for GM and DAWSON GEOPHYSICAL
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and DAWSON is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and DAWSON GEOPHYSICAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DAWSON GEOPHYSICAL 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 DAWSON GEOPHYSICAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DAWSON GEOPHYSICAL has no effect on the direction of GM i.e., GM and DAWSON GEOPHYSICAL go up and down completely randomly.
Pair Corralation between GM and DAWSON GEOPHYSICAL
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the DAWSON GEOPHYSICAL. In addition to that, GM is 1.52 times more volatile than DAWSON GEOPHYSICAL. It trades about -0.15 of its total potential returns per unit of risk. DAWSON GEOPHYSICAL is currently generating about 0.17 per unit of volatility. If you would invest 1,860 in DAWSON GEOPHYSICAL on September 13, 2024 and sell it today you would earn a total of 120.00 from holding DAWSON GEOPHYSICAL or generate 6.45% 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. DAWSON GEOPHYSICAL
Performance |
| Timeline |
| General Motors |
| DAWSON GEOPHYSICAL |
GM and DAWSON GEOPHYSICAL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and DAWSON GEOPHYSICAL
The main advantage of trading using opposite GM and DAWSON GEOPHYSICAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, DAWSON GEOPHYSICAL 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 DAWSON GEOPHYSICAL will offset losses from the drop in DAWSON GEOPHYSICAL's long position.The idea behind General Motors and DAWSON GEOPHYSICAL 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.| DAWSON GEOPHYSICAL vs. BJs Wholesale Club | DAWSON GEOPHYSICAL vs. Singapore Telecommunications Limited | DAWSON GEOPHYSICAL vs. Mobilezone Holding AG | DAWSON GEOPHYSICAL vs. Burlington Stores |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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