Correlation Between GM and Helios Fairfax
Can any of the company-specific risk be diversified away by investing in both GM and Helios Fairfax 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 Helios Fairfax into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Helios Fairfax Partners, you can compare the effects of market volatilities on GM and Helios Fairfax 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 Helios Fairfax. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Helios Fairfax.
Diversification Opportunities for GM and Helios Fairfax
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Helios is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Helios Fairfax Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Helios Fairfax Partners 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 Helios Fairfax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Helios Fairfax Partners has no effect on the direction of GM i.e., GM and Helios Fairfax go up and down completely randomly.
Pair Corralation between GM and Helios Fairfax
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.62 times more return on investment than Helios Fairfax. However, General Motors is 1.6 times less risky than Helios Fairfax. It trades about 0.05 of its potential returns per unit of risk. Helios Fairfax Partners is currently generating about 0.01 per unit of risk. If you would invest 3,805 in General Motors on September 3, 2024 and sell it today you would earn a total of 1,699 from holding General Motors or generate 44.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Helios Fairfax Partners
Performance |
| Timeline |
| General Motors |
| Helios Fairfax Partners |
GM and Helios Fairfax Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Helios Fairfax
The main advantage of trading using opposite GM and Helios Fairfax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Helios Fairfax 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 Helios Fairfax will offset losses from the drop in Helios Fairfax's long position.The idea behind General Motors and Helios Fairfax Partners 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.| Helios Fairfax vs. Blackrock International Growth | Helios Fairfax vs. Blackrock Enhanced Equity | Helios Fairfax vs. Eaton Vance Tax | Helios Fairfax vs. Blackrock Resources Commodities |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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