Correlation Between GM and Flameret
Can any of the company-specific risk be diversified away by investing in both GM and Flameret 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 Flameret into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Flameret, you can compare the effects of market volatilities on GM and Flameret 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 Flameret. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Flameret.
Diversification Opportunities for GM and Flameret
Average diversification
The 3 months correlation between GM and Flameret is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Flameret in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flameret 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 Flameret. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flameret has no effect on the direction of GM i.e., GM and Flameret go up and down completely randomly.
Pair Corralation between GM and Flameret
Allowing for the 90-day total investment horizon GM is expected to generate 1.19 times less return on investment than Flameret. But when comparing it to its historical volatility, General Motors is 4.36 times less risky than Flameret. It trades about 0.05 of its potential returns per unit of risk. Flameret is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 0.24 in Flameret on September 3, 2024 and sell it today you would lose (0.18) from holding Flameret or give up 75.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Flameret
Performance |
| Timeline |
| General Motors |
| Flameret |
GM and Flameret Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Flameret
The main advantage of trading using opposite GM and Flameret positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Flameret 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 Flameret will offset losses from the drop in Flameret's long position.| GM vs. GreenPower Motor | GM vs. ZEEKR Intelligent Technology | GM vs. Volcon Inc | GM vs. ECD Automotive Design |
| Flameret vs. Haydale Graphene Industries | Flameret vs. Versarien plc | Flameret vs. NanoXplore | Flameret vs. G6 Materials Corp |
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 Valuation module to check real value of public entities based on technical and fundamental data.
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