Correlation Between GM and Edify Acquisition
Can any of the company-specific risk be diversified away by investing in both GM and Edify Acquisition 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 Edify Acquisition into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Edify Acquisition Corp, you can compare the effects of market volatilities on GM and Edify Acquisition 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 Edify Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Edify Acquisition.
Diversification Opportunities for GM and Edify Acquisition
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Edify is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Edify Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edify Acquisition Corp 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 Edify Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edify Acquisition Corp has no effect on the direction of GM i.e., GM and Edify Acquisition go up and down completely randomly.
Pair Corralation between GM and Edify Acquisition
If you would invest 4,551 in General Motors on September 1, 2024 and sell it today you would earn a total of 1,008 from holding General Motors or generate 22.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 0.79% |
| Values | Daily Returns |
General Motors vs. Edify Acquisition Corp
Performance |
| Timeline |
| General Motors |
| Edify Acquisition Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
GM and Edify Acquisition Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Edify Acquisition
The main advantage of trading using opposite GM and Edify Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Edify Acquisition 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 Edify Acquisition will offset losses from the drop in Edify Acquisition's long position.The idea behind General Motors and Edify Acquisition Corp 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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