Correlation Between GM and Frost Low
Can any of the company-specific risk be diversified away by investing in both GM and Frost Low 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 Frost Low into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Frost Low Duration, you can compare the effects of market volatilities on GM and Frost Low 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 Frost Low. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Frost Low.
Diversification Opportunities for GM and Frost Low
Pay attention - limited upside
The 3 months correlation between GM and Frost is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Frost Low Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frost Low Duration 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 Frost Low. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frost Low Duration has no effect on the direction of GM i.e., GM and Frost Low go up and down completely randomly.
Pair Corralation between GM and Frost Low
Allowing for the 90-day total investment horizon General Motors is expected to generate 14.82 times more return on investment than Frost Low. However, GM is 14.82 times more volatile than Frost Low Duration. It trades about 0.05 of its potential returns per unit of risk. Frost Low Duration is currently generating about 0.14 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 1,754 from holding General Motors or generate 46.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Frost Low Duration
Performance |
| Timeline |
| General Motors |
| Frost Low Duration |
GM and Frost Low Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Frost Low
The main advantage of trading using opposite GM and Frost Low positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Frost Low 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 Frost Low will offset losses from the drop in Frost Low's long position.The idea behind General Motors and Frost Low Duration 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.| Frost Low vs. Calvert Global Energy | Frost Low vs. Firsthand Alternative Energy | Frost Low vs. Hennessy Bp Energy | Frost Low vs. Adams Natural Resources |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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