Correlation Between GM and First Citizens
Can any of the company-specific risk be diversified away by investing in both GM and First Citizens 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 First Citizens into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and The First Citizens, you can compare the effects of market volatilities on GM and First Citizens 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 First Citizens. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and First Citizens.
Diversification Opportunities for GM and First Citizens
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GM and First is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and The First Citizens in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Citizens 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 First Citizens. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Citizens has no effect on the direction of GM i.e., GM and First Citizens go up and down completely randomly.
Pair Corralation between GM and First Citizens
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.22 times more return on investment than First Citizens. However, GM is 1.22 times more volatile than The First Citizens. It trades about 0.07 of its potential returns per unit of risk. The First Citizens is currently generating about -0.02 per unit of risk. If you would invest 3,536 in General Motors on August 31, 2024 and sell it today you would earn a total of 2,023 from holding General Motors or generate 57.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 27.54% |
| Values | Daily Returns |
General Motors vs. The First Citizens
Performance |
| Timeline |
| General Motors |
| First Citizens |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
GM and First Citizens Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and First Citizens
The main advantage of trading using opposite GM and First Citizens positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, First Citizens 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 First Citizens will offset losses from the drop in First Citizens' long position.The idea behind General Motors and The First Citizens 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.| First Citizens vs. NRG Energy | First Citizens vs. Semtech | First Citizens vs. Allient | First Citizens vs. Flex |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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