Correlation Between GM and Fair Oaks
Can any of the company-specific risk be diversified away by investing in both GM and Fair Oaks 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 Fair Oaks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Fair Oaks Income, you can compare the effects of market volatilities on GM and Fair Oaks 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 Fair Oaks. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Fair Oaks.
Diversification Opportunities for GM and Fair Oaks
Poor diversification
The 3 months correlation between GM and Fair is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Fair Oaks Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fair Oaks Income 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 Fair Oaks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fair Oaks Income has no effect on the direction of GM i.e., GM and Fair Oaks go up and down completely randomly.
Pair Corralation between GM and Fair Oaks
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.2 times more return on investment than Fair Oaks. However, GM is 2.2 times more volatile than Fair Oaks Income. It trades about 0.16 of its potential returns per unit of risk. Fair Oaks Income is currently generating about 0.14 per unit of risk. If you would invest 5,096 in General Motors on September 2, 2024 and sell it today you would earn a total of 463.00 from holding General Motors or generate 9.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
General Motors vs. Fair Oaks Income
Performance |
| Timeline |
| General Motors |
| Fair Oaks Income |
GM and Fair Oaks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Fair Oaks
The main advantage of trading using opposite GM and Fair Oaks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Fair Oaks 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 Fair Oaks will offset losses from the drop in Fair Oaks' long position.The idea behind General Motors and Fair Oaks Income 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.| Fair Oaks vs. Toyota Motor Corp | Fair Oaks vs. SoftBank Group Corp | Fair Oaks vs. OTP Bank Nyrt | Fair Oaks vs. Las Vegas Sands |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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