Correlation Between GM and Fair Isaac
Can any of the company-specific risk be diversified away by investing in both GM and Fair Isaac 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 Isaac 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 Isaac, you can compare the effects of market volatilities on GM and Fair Isaac 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 Isaac. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Fair Isaac.
Diversification Opportunities for GM and Fair Isaac
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Fair is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Fair Isaac in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fair Isaac 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 Isaac. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fair Isaac has no effect on the direction of GM i.e., GM and Fair Isaac go up and down completely randomly.
Pair Corralation between GM and Fair Isaac
Allowing for the 90-day total investment horizon GM is expected to generate 1.74 times less return on investment than Fair Isaac. In addition to that, GM is 1.08 times more volatile than Fair Isaac. It trades about 0.09 of its total potential returns per unit of risk. Fair Isaac is currently generating about 0.17 per unit of volatility. If you would invest 73,665 in Fair Isaac on August 26, 2024 and sell it today you would earn a total of 161,870 from holding Fair Isaac or generate 219.74% 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. Fair Isaac
Performance |
| Timeline |
| General Motors |
| Fair Isaac |
GM and Fair Isaac Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Fair Isaac
The main advantage of trading using opposite GM and Fair Isaac positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Fair Isaac 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 Isaac will offset losses from the drop in Fair Isaac's long position.The idea behind General Motors and Fair Isaac 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 Isaac vs. SAP SE ADR | Fair Isaac vs. Tyler Technologies | Fair Isaac vs. Roper Technologies, Common | Fair Isaac vs. Cadence Design Systems |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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