Correlation Between GM and Enersize
Can any of the company-specific risk be diversified away by investing in both GM and Enersize 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 Enersize into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Enersize Oy, you can compare the effects of market volatilities on GM and Enersize 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 Enersize. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Enersize.
Diversification Opportunities for GM and Enersize
Good diversification
The 3 months correlation between GM and Enersize is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Enersize Oy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enersize Oy 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 Enersize. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enersize Oy has no effect on the direction of GM i.e., GM and Enersize go up and down completely randomly.
Pair Corralation between GM and Enersize
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.23 times more return on investment than Enersize. However, General Motors is 4.39 times less risky than Enersize. It trades about 0.07 of its potential returns per unit of risk. Enersize Oy is currently generating about -0.01 per unit of risk. If you would invest 3,524 in General Motors on August 28, 2024 and sell it today you would earn a total of 2,496 from holding General Motors or generate 70.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.79% |
| Values | Daily Returns |
General Motors vs. Enersize Oy
Performance |
| Timeline |
| General Motors |
| Enersize Oy |
GM and Enersize Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Enersize
The main advantage of trading using opposite GM and Enersize positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Enersize 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 Enersize will offset losses from the drop in Enersize's long position.The idea behind General Motors and Enersize Oy 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
Other Complementary Tools
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| 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 | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets |