Correlation Between GM and First IC
Can any of the company-specific risk be diversified away by investing in both GM and First IC 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 IC 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 IC, you can compare the effects of market volatilities on GM and First IC 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 IC. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and First IC.
Diversification Opportunities for GM and First IC
Very good diversification
The 3 months correlation between GM and First is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and First IC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First IC 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 IC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First IC has no effect on the direction of GM i.e., GM and First IC go up and down completely randomly.
Pair Corralation between GM and First IC
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the First IC. In addition to that, GM is 1.47 times more volatile than First IC. It trades about -0.1 of its total potential returns per unit of risk. First IC is currently generating about 0.23 per unit of volatility. If you would invest 890.00 in First IC on October 26, 2024 and sell it today you would earn a total of 140.00 from holding First IC or generate 15.73% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 95.24% |
Values | Daily Returns |
General Motors vs. First IC
Performance |
Timeline |
General Motors |
First IC |
GM and First IC Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with GM and First IC
The main advantage of trading using opposite GM and First IC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, First IC 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 IC will offset losses from the drop in First IC's long position.The idea behind General Motors and First IC 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 IC vs. CCFNB Bancorp | First IC vs. Glen Burnie Bancorp | First IC vs. Main Street Financial | First IC vs. Enterprise Financial Services |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
Other Complementary Tools
Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges |