Correlation Between GM and Fortress Transp
Can any of the company-specific risk be diversified away by investing in both GM and Fortress Transp 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 Fortress Transp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Fortress Transp Infra, you can compare the effects of market volatilities on GM and Fortress Transp 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 Fortress Transp. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Fortress Transp.
Diversification Opportunities for GM and Fortress Transp
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Fortress is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Fortress Transp Infra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortress Transp Infra 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 Fortress Transp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortress Transp Infra has no effect on the direction of GM i.e., GM and Fortress Transp go up and down completely randomly.
Pair Corralation between GM and Fortress Transp
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.83 times more return on investment than Fortress Transp. However, General Motors is 1.21 times less risky than Fortress Transp. It trades about -0.16 of its potential returns per unit of risk. Fortress Transp Infra is currently generating about -0.32 per unit of risk. If you would invest 5,612 in General Motors on September 18, 2024 and sell it today you would lose (497.00) from holding General Motors or give up 8.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Fortress Transp Infra
Performance |
| Timeline |
| General Motors |
| Fortress Transp Infra |
GM and Fortress Transp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Fortress Transp
The main advantage of trading using opposite GM and Fortress Transp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Fortress Transp 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 Fortress Transp will offset losses from the drop in Fortress Transp's long position.The idea behind General Motors and Fortress Transp Infra 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.| Fortress Transp vs. McGrath RentCorp | Fortress Transp vs. Custom Truck One | Fortress Transp vs. Alta Equipment Group | Fortress Transp vs. PROG Holdings |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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