Correlation Between GM and Going Public
Can any of the company-specific risk be diversified away by investing in both GM and Going Public 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 Going Public into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Going Public Media, you can compare the effects of market volatilities on GM and Going Public 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 Going Public. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Going Public.
Diversification Opportunities for GM and Going Public
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between GM and Going is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Going Public Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Going Public Media 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 Going Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Going Public Media has no effect on the direction of GM i.e., GM and Going Public go up and down completely randomly.
Pair Corralation between GM and Going Public
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.83 times more return on investment than Going Public. However, General Motors is 1.21 times less risky than Going Public. It trades about 0.05 of its potential returns per unit of risk. Going Public Media is currently generating about -0.03 per unit of risk. If you would invest 3,585 in General Motors on October 7, 2024 and sell it today you would earn a total of 1,592 from holding General Motors or generate 44.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.0% |
| Values | Daily Returns |
General Motors vs. Going Public Media
Performance |
| Timeline |
| General Motors |
| Going Public Media |
GM and Going Public Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Going Public
The main advantage of trading using opposite GM and Going Public positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Going Public 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 Going Public will offset losses from the drop in Going Public's long position.The idea behind General Motors and Going Public Media 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.| Going Public vs. Pearson plc | Going Public vs. Superior Plus Corp | Going Public vs. NMI Holdings | Going Public vs. SIVERS SEMICONDUCTORS AB |
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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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