Correlation Between GM and Fibra UNO
Can any of the company-specific risk be diversified away by investing in both GM and Fibra UNO 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 Fibra UNO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Fibra UNO, you can compare the effects of market volatilities on GM and Fibra UNO 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 Fibra UNO. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Fibra UNO.
Diversification Opportunities for GM and Fibra UNO
Modest diversification
The 3 months correlation between GM and Fibra is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Fibra UNO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fibra UNO 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 Fibra UNO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fibra UNO has no effect on the direction of GM i.e., GM and Fibra UNO go up and down completely randomly.
Pair Corralation between GM and Fibra UNO
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.9 times more return on investment than Fibra UNO. However, GM is 1.9 times more volatile than Fibra UNO. It trades about 0.03 of its potential returns per unit of risk. Fibra UNO is currently generating about -0.09 per unit of risk. If you would invest 5,261 in General Motors on October 26, 2024 and sell it today you would earn a total of 161.00 from holding General Motors or generate 3.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.33% |
| Values | Daily Returns |
General Motors vs. Fibra UNO
Performance |
| Timeline |
| General Motors |
| Fibra UNO |
GM and Fibra UNO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Fibra UNO
The main advantage of trading using opposite GM and Fibra UNO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Fibra UNO 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 Fibra UNO will offset losses from the drop in Fibra UNO's long position.The idea behind General Motors and Fibra UNO 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.| Fibra UNO vs. Grupo Sports World | Fibra UNO vs. Samsung Electronics Co | Fibra UNO vs. Verizon Communications | Fibra UNO vs. Ameriprise Financial |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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