Correlation Between GM and Fox Corp
Can any of the company-specific risk be diversified away by investing in both GM and Fox Corp 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 Fox Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Fox Corp Class, you can compare the effects of market volatilities on GM and Fox Corp 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 Fox Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Fox Corp.
Diversification Opportunities for GM and Fox Corp
Very poor diversification
The 3 months correlation between GM and Fox is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Fox Corp Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fox Corp Class 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 Fox Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fox Corp Class has no effect on the direction of GM i.e., GM and Fox Corp go up and down completely randomly.
Pair Corralation between GM and Fox Corp
Allowing for the 90-day total investment horizon GM is expected to generate 1.16 times less return on investment than Fox Corp. In addition to that, GM is 1.18 times more volatile than Fox Corp Class. It trades about 0.26 of its total potential returns per unit of risk. Fox Corp Class is currently generating about 0.35 per unit of volatility. If you would invest 3,868 in Fox Corp Class on August 27, 2024 and sell it today you would earn a total of 503.00 from holding Fox Corp Class or generate 13.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Fox Corp Class
Performance |
| Timeline |
| General Motors |
| Fox Corp Class |
GM and Fox Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Fox Corp
The main advantage of trading using opposite GM and Fox Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Fox Corp 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 Fox Corp will offset losses from the drop in Fox Corp's long position.The idea behind General Motors and Fox Corp Class 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.| Fox Corp vs. News Corp A | Fox Corp vs. News Corp B | Fox Corp vs. Paramount Global Class | Fox Corp vs. Liberty Media |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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