Correlation Between GM and First Interstate
Can any of the company-specific risk be diversified away by investing in both GM and First Interstate 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 First Interstate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and First Interstate BancSystem, you can compare the effects of market volatilities on GM and First Interstate 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 First Interstate. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and First Interstate.
Diversification Opportunities for GM and First Interstate
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GM and First is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and First Interstate BancSystem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Interstate Ban 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 First Interstate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Interstate Ban has no effect on the direction of GM i.e., GM and First Interstate go up and down completely randomly.
Pair Corralation between GM and First Interstate
Allowing for the 90-day total investment horizon GM is expected to generate 1.0 times less return on investment than First Interstate. But when comparing it to its historical volatility, General Motors is 1.15 times less risky than First Interstate. It trades about 0.07 of its potential returns per unit of risk. First Interstate BancSystem is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,272 in First Interstate BancSystem on August 31, 2024 and sell it today you would earn a total of 1,225 from holding First Interstate BancSystem or generate 53.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. First Interstate BancSystem
Performance |
| Timeline |
| General Motors |
| First Interstate Ban |
GM and First Interstate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and First Interstate
The main advantage of trading using opposite GM and First Interstate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, First Interstate 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 First Interstate will offset losses from the drop in First Interstate's long position.The idea behind General Motors and First Interstate BancSystem 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.| First Interstate vs. First Financial Bankshares | First Interstate vs. Independent Bank Group | First Interstate vs. CVB Financial | First Interstate vs. Eagle Bancorp Montana |
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..
Other Complementary Tools
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance |