Correlation Between GM and Fresh2
Can any of the company-specific risk be diversified away by investing in both GM and Fresh2 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 Fresh2 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Fresh2 Group, you can compare the effects of market volatilities on GM and Fresh2 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 Fresh2. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Fresh2.
Diversification Opportunities for GM and Fresh2
Very good diversification
The 3 months correlation between GM and Fresh2 is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Fresh2 Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fresh2 Group 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 Fresh2. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fresh2 Group has no effect on the direction of GM i.e., GM and Fresh2 go up and down completely randomly.
Pair Corralation between GM and Fresh2
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.22 times more return on investment than Fresh2. However, General Motors is 4.47 times less risky than Fresh2. It trades about 0.05 of its potential returns per unit of risk. Fresh2 Group is currently generating about -0.04 per unit of risk. If you would invest 3,762 in General Motors on September 3, 2024 and sell it today you would earn a total of 1,797 from holding General Motors or generate 47.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Fresh2 Group
Performance |
| Timeline |
| General Motors |
| Fresh2 Group |
GM and Fresh2 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Fresh2
The main advantage of trading using opposite GM and Fresh2 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Fresh2 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 Fresh2 will offset losses from the drop in Fresh2's long position.The idea behind General Motors and Fresh2 Group 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.| Fresh2 vs. Crinetics Pharmaceuticals | Fresh2 vs. Viridian Therapeutics | Fresh2 vs. Cytokinetics | Fresh2 vs. Structure Therapeutics American |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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