Correlation Between GM and Hennessy Gas
Can any of the company-specific risk be diversified away by investing in both GM and Hennessy Gas 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 Hennessy Gas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Hennessy Gas Utility, you can compare the effects of market volatilities on GM and Hennessy Gas 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 Hennessy Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Hennessy Gas.
Diversification Opportunities for GM and Hennessy Gas
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GM and Hennessy is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Hennessy Gas Utility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Gas Utility 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 Hennessy Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Gas Utility has no effect on the direction of GM i.e., GM and Hennessy Gas go up and down completely randomly.
Pair Corralation between GM and Hennessy Gas
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Hennessy Gas. In addition to that, GM is 1.98 times more volatile than Hennessy Gas Utility. It trades about -0.14 of its total potential returns per unit of risk. Hennessy Gas Utility is currently generating about -0.23 per unit of volatility. If you would invest 2,904 in Hennessy Gas Utility on September 12, 2024 and sell it today you would lose (175.00) from holding Hennessy Gas Utility or give up 6.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
General Motors vs. Hennessy Gas Utility
Performance |
| Timeline |
| General Motors |
| Hennessy Gas Utility |
GM and Hennessy Gas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Hennessy Gas
The main advantage of trading using opposite GM and Hennessy Gas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Hennessy Gas 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 Hennessy Gas will offset losses from the drop in Hennessy Gas' long position.The idea behind General Motors and Hennessy Gas Utility 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.| Hennessy Gas vs. Utilities Fund Investor | Hennessy Gas vs. Amg Yacktman Focused | Hennessy Gas vs. Chemicals Portfolio Chemicals | Hennessy Gas vs. Invesco Energy Fund |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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