Correlation Between GM and Freelancer
Can any of the company-specific risk be diversified away by investing in both GM and Freelancer 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 Freelancer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Freelancer, you can compare the effects of market volatilities on GM and Freelancer 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 Freelancer. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Freelancer.
Diversification Opportunities for GM and Freelancer
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and Freelancer is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Freelancer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freelancer 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 Freelancer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freelancer has no effect on the direction of GM i.e., GM and Freelancer go up and down completely randomly.
Pair Corralation between GM and Freelancer
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.68 times more return on investment than Freelancer. However, General Motors is 1.47 times less risky than Freelancer. It trades about 0.1 of its potential returns per unit of risk. Freelancer is currently generating about -0.05 per unit of risk. If you would invest 4,829 in General Motors on September 2, 2024 and sell it today you would earn a total of 730.00 from holding General Motors or generate 15.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 96.97% |
| Values | Daily Returns |
General Motors vs. Freelancer
Performance |
| Timeline |
| General Motors |
| Freelancer |
GM and Freelancer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Freelancer
The main advantage of trading using opposite GM and Freelancer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Freelancer 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 Freelancer will offset losses from the drop in Freelancer's long position.The idea behind General Motors and Freelancer 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.| Freelancer vs. Oneview Healthcare PLC | Freelancer vs. Event Hospitality and | Freelancer vs. Austco Healthcare | Freelancer vs. EVE Health Group |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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