Correlation Between GM and Freescale Semiconductor
Can any of the company-specific risk be diversified away by investing in both GM and Freescale Semiconductor 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 Freescale Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Freescale Semiconductor, you can compare the effects of market volatilities on GM and Freescale Semiconductor 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 Freescale Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Freescale Semiconductor.
Diversification Opportunities for GM and Freescale Semiconductor
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GM and Freescale is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Freescale Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freescale Semiconductor 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 Freescale Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freescale Semiconductor has no effect on the direction of GM i.e., GM and Freescale Semiconductor go up and down completely randomly.
Pair Corralation between GM and Freescale Semiconductor
If you would invest (100.00) in Freescale Semiconductor on January 5, 2025 and sell it today you would earn a total of 100.00 from holding Freescale Semiconductor or generate -100.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 0.0% |
| Values | Daily Returns |
General Motors vs. Freescale Semiconductor
Performance |
| Timeline |
| General Motors |
| Freescale Semiconductor |
Risk-Adjusted Performance
Very Weak
Weak | Strong |
GM and Freescale Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Freescale Semiconductor
The main advantage of trading using opposite GM and Freescale Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Freescale Semiconductor 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 Freescale Semiconductor will offset losses from the drop in Freescale Semiconductor's long position.The idea behind General Motors and Freescale Semiconductor 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.| Freescale Semiconductor vs. Luxfer Holdings PLC | Freescale Semiconductor vs. Hudson Technologies | Freescale Semiconductor vs. NL Industries | Freescale Semiconductor vs. Exchange Bank |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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